Kesa rejects £1.7bn offer from KKR-led private equity group

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The Independent Online

Kesa Electricals, which owns the UK chain and the French retailer Darty, revealed yesterday that it had received an approach from an unnamed private-equity consortium. Sources in the City indicated last night that KKR and Blackstone are behind the offer, with possible help from Permira.

Shares in retailers across Europe rallied on the expectation that more take-over activity in the sector is on the way. Few UK retail companies seem safe from a bid. Kesa shares climbed 32p to close at 325p, the level of the offer.

In a brief statement, Kesa noted it "has received a conditional proposal from a private-equity consortium regarding a possible offer at 325p a share". The statement also said the board "has concluded that the proposal undervalues the company and its prospects" and so directors "unanimously rejected the proposal".

The company started as Comet Battery Stores, a two-man business in Hull that charged batteries for radios. It later pioneered the concept of out-of-town retailing and joined the stock market in 1970. It was bought by Kingfisher for £129m in 2004, demerging in 2003. There are more than 200 Comet stores in the UK.

KKR is possibly the best-known global buyout group, famous for its record $25bn (£14bn) buyout of the tobacco and food conglomerate RJR Nabisco in 1989. The deal spawned the book and film Barbarians at the Gate, and KKR is still run by the cousins Henry Kravis and George Roberts.

The Blackstone Group is one of the few private-equity groups to compete alongside KKR for the biggest deals. It is on the verge of closing the world's largest private-equity funds at $13bn (£8bn). Permira, once the buyout arm of Schroders investment bank, is among the leading European players.

The appetite for retail buyouts is huge. Apax Partners recently launched a bid for House of Fraser and Permira has had a 210p-a-share offer rejected by HMV.

Analysts have long been dissatisfied with the performance of Comet, though Darty is regarded as a solid business. Richard Ratner, at Seymour Pierce, noted that the announcement sent Kesa shares to a level not seen for more than a year. "Any offer of 340p a share or above and the board will have to look carefully at it."

As speculation of further deals mounted, Kingfisher shares became the best performer in the FTSE 100. Europe's biggest home-improvement retailer gained 14.25p to close at 253.25p.

Traders have regarded Kingfisher as a bid target for many months. "At the moment, anyone could buy anything," one dealer said. KKR could return with a higher bid.

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