Electricals and mobile phone retailer Carphone Warehouse (CPW) has announced today that it has acquired the remaining 50 per cent stake in its European joint venture with US electricals retailer Best Buy for £500 million, ending their five year partnership.
Comprised of £420 million in cash, the deal also includes £80 million in CPW stock and the retailer added that £341 million of the net consideration will be paid in cash upon completion.
Best Buy has long sought to diminish its international operations as it continues to face strong competition both in its domestic market and overseas and this deal will see the end of the retailer’s partnership with the British telecoms firm.
“After reviewing the business and spending time with our partners, we concluded that the timing and economics were right to enter into this agreement with CPW,” Hubert Joly, President and CEO of Best Buy explained.
“This transaction allows us to simplify our business; substantially improve our Return on Invested Capital, one of the five pillars of our Renew Blue transformation; and strengthen our balance sheet.
“Each international market is different and the sale of our European operations should not suggest any similar action in our other international businesses,” he added.
CPW has also announced today that like-for-like (LFL) sales across its European operations for the quarter ended March 31st 2013 rose 6.5 per cent despite the challenges of the French market thanks to a “continued strong UK performance”.
UK LFLs jumped 15 per cent over the quarter, following on from a positive Christmas trading period while the retailer continued to grew its market share in postpay and prepay sectors.
As such, CPW believes it is in a strong position to deliver growth on the continent and noted that it expects the Best Buy transaction to enhance earnings in the current financial year.
Commenting on today’s conditional agreement, CPW CEO Roger Taylor said: “Today we are announcing the end of our five year joint venture with Best Buy and with this the return of CPW Europe to its original shareholders.
“Carphone Warehouse and Best Buy have enjoyed a great relationship over the last five years ensuring that we shared and enjoyed many aspects of each other’s business attributes.
“However, following the sale of our US interest last year, we have become increasingly responsible for the day-to-day operations of CPW Europe whilst conversely Best Buy have become more focused on their wholly-owned businesses.
“For us, the transaction will simplify our ownership structure, streamline management decision- making and give us full ownership of our growth opportunities across Europe and other markets around the world.”