Best Buy Co, the largest US electronics retailer, will pay £1.1 billion (US$2.15 billion) for a 50 percent stake in a joint-venture holding, Carphone Warehouse Group PLC's European and US retail outlets.
The venture will comprise Carphone Warehouse’s 2,400 retail stores in nine European countries, the Internet and direct businesses, insurance and airtime reselling operations, the companies said in a statement yesterday. The assets will also include Carphone Warehouse’s share of an existing venture with Best Buy.
The deal will allow Richfield, Minnesota-based Best Buy to introduce its stores across Europe. Carphone Warehouse, Europe’s largest handset retailer, said it would use the proceeds to cut debt, invest in broadband services and make acquisitions.
The transaction will leave the ownership structure of London-based Carphone Warehouse intact, including the minority stake held by founder and CEO Charles Dunstone.
“This is an opportunity as much as anything to take advantage of our own expansion plans,” Carphone Warehouse chief financial officer Roger Taylor said on a conference call yesterday.
Carphone Warehouse fell £0.078, or 2.6 percent, to £2.92 as of 9:06am in London trading yesterday. The stock had lost 13 percent this year year to date. Best Buy fell US$0.99, or 2.2 percent, to US$43.45 in New York Stock Exchange trading on Wednesday.
Best Buy International CEO Bob Willett will be chairman of the new venture, and Taylor will be CEO of the venture while retaining his current role at Carphone Warehouse.
The new company will have a board with executives from Best Buy and Carphone Warehouse, including Dunstone.
Current Carphone Warehouse stores will keep the Carphone Warehouse name, the companies said. The new, larger stores that are opened in Europe will be branded with the Best Buy name.
“We have very ambitious expansion plans,” Taylor said, declining to disclose how many stores the venture plans to open.
Carphone Warehouse and Best Buy have a partnership to run Best Buy Mobile in the US and Geek Squad, Best Buy’s technical services unit, in Europe. Best Buy bought 3 percent of Carphone Warehouse last year.
Best Buy plans to consolidate the new venture, which it forecast would add about US$5 billion to fiscal 2009 revenue. Including the negative effect of the reduction in its share repurchases, the transaction is seen adding US$0.05 to US$0.07 to Best Buy’s fiscal 2009 diluted earnings per share, it said.
On a conference call, Carphone Warehouse and Best Buy executives declined to comment on whether the agreement was an initial step toward a potential takeover of Carphone Warehouse.
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