GadgetRatty: Carphone Warehouse & Best Buy to Form New Company in Europe

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Carphone Warehouse & Best Buy to Form New Company in Europe

2008-05-08 16:32:09 by Patrick Birmingham in Cell Phone Digest

The Carphone Warehouse and Best Buy Co., Inc. have agreed to form a new venture to capitalize on the European consumer's evolving appetite for consumer electronics. The assets of the newly-formed company will comprise The Carphone Warehouse's existing retail business, operating from more than 2,400 stores in nine European countries under the Carphone Warehouse and Phone House brands; and The Carphone Warehouse's share of its existing relationships with Best Buy.

Best Buy has fiscal 2008 revenues of $40 billion, operating income of $2.2 billion, 150,000 employees and 1,314 stores providing over 48 million square feet of sales space in the United States, Canada and China. Best Buy plans to acquire a 50% stake in the new company for a cash consideration of BPS 1.1 billion, or $2.1 billion.

Consumer electronics has been the fastest-growing category in European retail over the past five years and represents an estimated market of approximately $175 billion. The two companies expect growth in consumer electronics to be led by the convergence in entertainment, computing and communications.

Best Buy and The Carphone Warehouse expect wireless information provision, mobility and broadband to create significant new consumer and business opportunities. Demonstrating, advising on, configuring and connecting these services will be key to success in this new market. The two companies believe that the customer focus and passion for impartial advice that they share will be crucial elements of the new venture, and give it the potential to build a substantial presence in European larger format consumer electronics retailing.

On completion of the transaction, The Carphone Warehouse and Best Buy will each own 50% of the retail business, comprising all the 2,400 stores, the web and direct businesses, the insurance operations, and its airtime reselling businesses. The Carphone Warehouse continues to own 100% of its fixed line telecoms business in the U.K., comprising TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture. Best Buy continues to hold its 2.9% stake in The Carphone Warehouse.

The Carphone Warehouse plans to use the proceeds of the transaction to repay existing debt, to invest in broadband customer growth and infrastructure, and to invest in new areas of growth presented by the transaction.

The transaction is subject to the approval of The Carphone Warehouse's shareholders. The directors of The Carphone Warehouse have unanimously agreed to vote in favour of the resolution to approve the transaction at the extraordinary general meeting scheduled to take place by early August.