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Carphone Warehouse and Dixons confirm all-share merger of equals Carphone Warehouse and Dixons confirm all-share merger of equals
(about 2 hours later)
Carphone Warehouse and Dixons have announced an all-share merger of equals in a deal worth £3.8 billion as the high street giants aim to build a multi-billion pound electronics business.Carphone Warehouse and Dixons have announced an all-share merger of equals in a deal worth £3.8 billion as the high street giants aim to build a multi-billion pound electronics business.
However, the City was not convinced, with Dixons, which owns Currys and PC World, falling 3.8 per cent to 48.95p and Carphone off 2.4 per cent to 320p, despite the latter pledging to avoid the mistakes made in its failed joint venture with United States giant Best Buy.However, the City was not convinced, with Dixons, which owns Currys and PC World, falling 3.8 per cent to 48.95p and Carphone off 2.4 per cent to 320p, despite the latter pledging to avoid the mistakes made in its failed joint venture with United States giant Best Buy.
The pair today confirmed speculation talks over the deal, which began in February, had been completed with a 50-50 partnership called Dixons Carphone. “Dixons is pretty much the same business model as Best Buy,” said CMC Markets analyst Jasper Lawler. “Investors are probably thinking there’s not a good history of cost saving here.”
The duo hope to save £80 million in costs by merging but have said the main motivation for the move is to harness the increasingly interdependence of smartphones and electrical appliances. Carphone entered into an ill-fated venture with Best Buy in 2008, but the US group retreated in 2011 to fight intense competition in the States following a lacklustre performance against online players and Dixons in the UK.
Carphone chief executive Andrew Harrison, who will become deputy chief executive of the new company, said: “Best Buy was a different era — it was trying to build market share at a difficult economic time. Today is two market leaders who are flourishing coming together.”
The pair today confirmed speculation talks over the deal, which began in February, had been completed with a 50-50 partnership called Dixons Carphone.They hope to strip out £80 million of costs by 2018 as they combine their assets and buy products from suppliers together.
The retailers, who employ 43,000 staff, estimate 860 jobs will be axed when they merge head offices. However, 1700 jobs will be created, largely on the shop floor, as they attempt to offer a better service.
Dixons boss Sebastian James will be the chief executive of the new company, Carphone founder Sir Charles Dunstone its chairman and Carphone boss Andrew Harrison will be deputy chief executive.Dixons boss Sebastian James will be the chief executive of the new company, Carphone founder Sir Charles Dunstone its chairman and Carphone boss Andrew Harrison will be deputy chief executive.
Sir Charles Dunstone, Chairman of Carphone said: "We have a deep respect for each other and 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. James, who will head the new entity, said: “With Best Buy we walloped them and that was great fun. This is different. We are the market leader and we are marrying at a time when both businesses are flourishing. We have made  a modest upgrade to our profit forecasts and customers like us more than ever before.”
“We are also creating jobs and we see many opportunities for further growth. This is a new chapter for both businesses and we are energised and proud to be part of what will be another fantastic journey for consumers and shareholders."
Dixons chairman John Allan added: "This merger will create a new, world class British retailer for the new digital age, with new opportunities for growth and greater scale and reach."