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Is Harvey Norman Holdings Limited (ASX:HVN) a takeover target?

It sounds like a bad meme, but Gerry Harvey is channelling Elon Musk!

You wouldn’t have thought the 79-year-old chair of Harvey Norman Holdings Limited (ASX: HVN) would have anything in common with the 47-year-old tech entrepreneur and CEO of Tesla Inc, but I could have sworn I heard Elon speaking at Harvey Norman’s annual general meeting (AGM) today.

The Australian Financial Review quoted Mr. Harvey saying “it’s a wonderful opportunity for us to privatise the company” after the HVN share price slumped to around $3 a share before today’s bounce.

That reminds me of Musk’s twitter comments about taking Tesla private four months ago.

Go-Go Harvey Norman!

Fortunately for Mr. Harvey, he didn’t suggest a price he would take the company private, although the 2.7% jump in Harvey Norman’s share price to $3.09 in after lunch trade means he will need to pay that much more for a management buyout (MBO).

But the share price jump wasn’t sparked by takeover speculation. It was already rallying before the AGM when the electronics and furniture retailer released a trading update.

Aggregate sales across the Harvey Norman group jumped 2.7% to $2.9 billion for period July 1 to November 23, while comparable aggregate sales (sales from stores opened a year or more) increased 3%.

That’s a very good result and the figures suggest that things might be turning a corner for the embattled retailer, which had been struggling against fallings sales from the property market downturn.

While total franchisee sales fell 1.3% in the period, a very strong surge in sales from its Malaysian business gave battle wary shareholders a much-needed morale boost.

The retailer is seen as being one of the most exposed to a property slump but it isn’t alone.

This is why the JB Hi-Fi Limited (ASX: JBH) share price, Nick Scali Limited (ASX: NCK) share price, and to a certain extent, Myer Holdings Ltd (ASX: MYR) share price have all been on the nose.

Is it time to buy the stock?

The turnaround in sales is great news but it may not be enough to turn the tide of poor investor sentiment towards the group.

Management still has questions to answer about the failed investment in a collapsed dairy farm and loans to joint-venture partners and franchisees.

Harvey Norman doesn’t have a clean set of accounts that’s easy to understand and management runs the company like a private enterprise.

All the more reason for an MBO and if Mr. Harvey was serious about a buyout, he might be compelled to lob a bid before the next AGM as Harvey Norman is facing a potential board spill next year after shareholders voted down its remuneration report for the first time.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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