A £3.7 billion (€4.5 billion/$6.2 billion) merger of UK retailers Carphone Warehouse and Dixons Retail is widely expected to be announced this week, in a move that would shake up the UK retail market for mobile phones and also bring the phrase the "Internet of Things" to the wider British consciousness.
A report in UK daily, The Guardian, highlighted how the ambition of technology companies far and wide to connect home appliances, cars and gadgets to a global network is an important driver of the planned alliance: Carphone Warehouse knows the smartphones and tablets that will act as the remote controls for future connected appliances, while Dixons deals in electrical appliances.
The Financial Times also noted that the merger is expected to halve the holding of Carphone Warehouse founder Sir Charles Dunstone in the enlarged group. He currently holds 23.5 per cent of Carphone, and his stake is expected to fall to about 11.75 per cent. Sir Charles is also expected to remain as chairman of the combined group, with the CEO role taken by Dixons chief Sebastian James. Andrew Harrison, chief executive of Carphone, is expected to be deputy CEO.
A merger would create a group with 3,000 stores across Europe and turnover of almost £12 billion. Analysts at Exane BNP Paribas forecast potential savings of up to £100 million, according to the FT.
The Guardian noted that last year Dixons made pre-tax profits of £94.5 million on sales of £8.2 billion while Carphone made £59 million on a turnover of £3.7 billion.
Carphone's track record on mergers is not exactly flawless. A European joint venture with U.S. company Best Buy ended in failure, although this was not necessarily the UK company's fault. In June 2013, Carphone bought back the 50 per cent stake it did not own in New BBED Limited ("CPW Europe") from Best Buy for a net consideration of £471 million. New BBED was the parent company of the joint venture between Carphone Warehouse and Best Buy. The stake was originally sold to Best Buy in 2008 for £1.1 billion.
Carphone has also been in the headlines for different reasons recently: the UK company and Virgin group are understood to be considering selling their stakes in their joint venture Virgin Mobile France. SFR and Bouygues Telecom are both reportedly interested in the French mobile virtual network operator (MVNO).
For more:
- see this Guardian article
- see this Financial Times article
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