Best Buy, Carphone Warehouse Create New Company

Best Buy, Carphone Warehouse Create New Company
May 08, 2008

The Carphone Warehouse Group PLC and Minneapolis-based Best Buy Co. Inc. have agreed to form a new venture to accelerate their growth. 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 plans to acquire a 50 percent stake in the new company for a cash consideration of $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. On completion of the transaction, The Carphone Warehouse and Best Buy will each own 50 percent 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 percent 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. 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 new venture would also benefit from a long-term commercial agreement with The Carphone Warehouse's fixed-line division in the U.K., enabling it to create attractive offerings through the extension of the subsidized hardware model from mobile to fixed line. The transaction is subject to the approval of The Carphone Warehouse's shareholders.