UPDATE: Knight Vinke Stake Continues To Buoy Kesa Shares

29th Jun 2010 12:33

(Updates and rewrites, adding detail.) By Molly Neal Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Shares in retailer Kesa Electricals PLC (KESA.LN) continued to rise Tuesday amid speculation as to why activist investor Knight Vinke Asset Management LLC has built a stake in the company. At 1124 GMT Kesa's shares were up 2.3% at 125 pence in a lower London market, adding to a 5.1% gain Monday after Kesa announced that Knight Vinke held a 3.05% stake in the company. A spokeswoman for Kesa said the company hadn't talked with Knight Vinke but declined to comment on whether it would now be making contact with its latest shareholder. Knight Vinke declined to comment. Knight Vinke is renowned for its activist stance and is currently pressuring Italian oil company Eni SpA (E) to spin off its gas pipelines and stake in Snam Rete Gas SpA (SRG.MI) to reduce debt and release hidden value in the company. However analysts don't view Kesa as a break-up target. With a market capitalization of GBP977 million it is smaller than the companies Knight Vinke usually targets, which have included HSBC Holdings PLC (HBC) and Royal Dutch Shell PLC (RDSA). The 3% stake therefore isn't a large investment for the asset manager and may simply represent an opportunity to buy an undervalued stock. Kesa trades at 12.6 times forward earnings compared with 18.2 times for peer DSG International and 23.2 times for Carphone Warehouse Group PLC (CPW.LN) according to data from Infinancials. Kesa reported a mixed full-year performance last week. While Darty, its French brand, is performing well, the Comet brand in the U.K. continues to struggle. Kesa said last week it plans to remodel and rebrand its Comet stores during the next two years as it shifts to higher-margin products. Kesa faces intensifying competition in the U.K. from DSG's remodeled Currys and PC World stores and from U.S.-based Best Buy Inc.(BBY) which recently launched in the U.K. -By Molly Neal, Dow Jones Newswires; +44 207 842 9358; [email protected] (END) Dow Jones Newswires June 29, 2010 07:33 ET (11:33 GMT)