Knight Vinke Asset Management LLC, the investment firm that said Nov. 30 it raised its voting stake in Kesa Electricals Plc to 8.8 percent, may seek the disposal of the retailer’s Comet electronics chain, a sale and leaseback of its French stores or an increase in debt, UBS AG said.
“Knight Vinke may try to instigate a one-off return of capital,” UBS analysts including Andrew Hughes and Adam Cochrane said in a report. “Increasing the financial gearing and returning cash to shareholders is probably the most likely.” The brokerage has a “neutral” rating on Kesa.
Knight Vinke, based in New York, has built up the second- largest shareholding in Kesa with five share purchases in the last two months. Los Angeles-based Capital Research is the largest shareholder in the retailer, which also owns the Darty consumer electronics chain in France, according to Bloomberg data.
If Kesa sells and leases back 300 million euros ($398 million) of French property, it “is unlikely to create significant value” as capital would have to passed to pension trustees, UBS said. Increasing borrowing to 500 million euros, with 300 million euros secured against property, is the “most feasible” option, they wrote.
The brokerage said it is “hard to see” a trade buyer or private equity group being interested in buying the Comet business in the U.K., and a sale of the emerging markets businesses would limit future growth opportunities.
Kesa reports interim results on Dec. 8.
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