Computer Business Review

Carphone Warehouse and Dixons announce £3.8bn retail mega-merger

by Michael Moore| 15 May 2014

Dixons Carphone will operate around 3,000 stores throughout Europe.

Two of Britain's largest electronics companies have announced they are to merge in a deal worth £3.8bn.

Dixons Retail, which owns over 500 Currys and PC World stores throughout the UK, will be merging with mobile specialists Carphone Warehouse, which operates more than 2,000 stores throughout Europe, to create a new firm to be known as Dixons Carphone.

The deal was confirmed today by Dixons chief executive Sebastian James as he outlined the company's trading performance over the past financial year, althought the two firms had been in discussions since February.

In its results, Dixons announced like-for-like sales were up 3%, and that its full-year profit was expected to be "at the top end of market expectations", totalling around £150m to £160m. In its most recent set of quarterly financial results, released two weeks ago, Carphone Warehouse said recorded a 2.3% increase in like-for-like revenues, and estimated an operating profit between £145m and £155m.

Following the news, the share prices of both companies rose before falling back. At the time of going to press, Dixons Retail's share price was down 3.95% from the start of day at 48.90p per share, with Carphone Warehouse shares down 2.53% at 319.50p per share

Ownership of the new business will be split equally between existing shareholders of the two firms; it was announced, with Sir Charles Dunstone, Carphone's chairman and founder, chairing the new group, and James becoming its chief executive.

"Today we also announce that we are setting out on a new journey with Carphone Warehouse and it is good to be in such a strong position as we embark on this adventure," James said.

"The ability to take what we have built in electrical retailing and add the profound expertise of Carphone Warehouse in connectivity would make us a leading force in retailing for a connected world.

"Together we can create a seamless experience for our customers that will enable technology to deliver what it promises - that is, to make their lives better."

Dunstone said: "We are incredibly excited about the opportunity today's news brings to our organisations, our consumers and our investors. We see the merger of these two great companies as an opportunity to bring our skills together for the consumer and create a new retailer for the digital age."

Carphone and Dixons said the merged company would benefit from greater buying power, extra growth options and annual cost cuts of at least £80m from the 2017-18 fiscal year onwards.

The companies said the deal would look to exploit the soaring number of devices connected to the internet, since Dixons sold them and Carphone Warehouse connected them.

James stated that the merger should not result in any branch closures, but expected there would be job cuts in the merged company "as a result of the rationalisation of certain operational and support functions".

However Carphone Warehouse said "significant job creation" was expected as part of the deal, predicting a 4% increase in new staff as a result.

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