Kesa shares surge following split speculation

Market chatter suggests Comet owner may be broken up as activist investor increases involvement

On the up: The new investment has seen Kesa's share price rise more than five per cent

Speculation is mounting that Comet parent Kesa Electricals could be broken up as renowned activist investment firm Knight Vinke continues to up its stake in the retail group.

Knight Vinke has previously successfully lobbied for change at investments including HSBC, Royal Dutch Shell and VNU. It first invested in Kesa in May, and this week upped its stake to three per cent. News of the investment fuelled a more than five per cent increase in Kesa's share price yesterday.

Last week Kesa announced upbeat financial results for the year to the end of April. Group sales rose 3.4 per cent to £5.1bn, primarily fuelled by a strong performance from the firm's Darty France operations. But Comet's revenue dropped 0.6 per cent to £1.65bn. Group pre-tax profit stood at £69.6m, compared to an £81.8m loss last year.

In common with arch-rival Dixons, Comet is undergoing a period of change, and both firms have commented on the tough economic conditions they continue to face. The UK market has also recently welcomed US giant Best Buy, which has teamed up with Carphone Warehouse to create Best Buy Europe.

Last financial year, three Comet stores closed while one opened. This year the plan is to open three, close nine and refurbish 40. The high street mainstay will also continue to drive online sales.

Both Kesa and Knight Vinke have yet to comment on the speculation.