Dixons and Carphone agree £3.8 billion merger

Thursday 15 May 2014 15.14
New pan-European mobile phone and electricals group will have about 2,900 stores
New pan-European mobile phone and electricals group will have about 2,900 stores

Carphone Warehouse and Dixons Retail have agreed a £3.8 billion all-share merger, creating a powerful pan-European mobile phone and electricals group with about 2,900 stores. 

Carphone is Europe's biggest independent mobile phone retailer, and Dixons is Europe's second biggest electricals retailer.

The two companies said the deal would be implemented by way of a scheme of arrangement of Dixons.

They said the merger would result in each of Dixons' and Carphone's shareholders holding 50% of a group to be called Dixons Carphone Plc. 

Under the terms of the merger, Dixons shareholders will receive 0.155 of a new Dixons Carphone share in exchange for each Dixons share.

Dixons Retail Group has more than 900 shops across Europe, including 28 Currys and PC World stores in Ireland.

Carphone Warehouse has 2,000 stores in Europe, including 90 in Ireland, and also holds a 46% stake in operator Virgin Mobile France.

Based on yesterday's closing prices Carphone had a market capitalisation of £1.90 billion and Dixons £1.87 billion.
              
Carphone and Dixons said on February 24 they were in merger talks and had been given a May 19 deadline by the UK Takeover Panelto agree a deal.
              
The two firms said they will be able to achieve integrated mobile retailing and procurement synergies, together with cost savings, of at least £80m on a recurring basis which are expected to be delivered in full in the 2017-18 year.
              
Charles Dunstone, Carphone's co-founder, chairman and 23.5% shareholder, will chair the combined group.
              
Dixons will take the top two executive roles, with its chief executive Sebastian James and chief financial officer Humphrey Singer adopting the same roles at the combined group.
              
Andrew Harrison, Carphone's CEO, will become deputy CEO, while Roger Taylor, deputy chairman of Carphone, and John Allan, the Dixons Retail chairman, will both be deputy chairmen.

The ever-increasing pace of the digital revolution is also key factor in the merger, with smartphones and synced devices integrating into more of our everyday lives. 
              
The rationale for the merger is the increasing convergence of the smartphone and tablet market with that for electrical goods such as televisions, with Carphone bringing the expertise for the former and Dixons the expertise for the latter.
              
Dixons is currently under exposed to the key area of mobile/smartphone retailing, while Carphone will likely face increased pressure from mobile phone networks wanting to be more reliant on their own direct channels to consumers.

The companies said there will be "significant job creation" through the rollout of the combined Dixons Carphone retail offering, resulting in an increase of around 4% of the combined group's workforce by the end of 2016.
 
But this increase will be partially offset by the combination of operational and support functions, causing a 2% drop in total headcount, the firms added.

The deal is not expected to result in store closures because most of PC World and Currys outlets are in out-of-town locations, compared with the main street sites preferred by Carphone.

Dixons also released a trading statement today, predicting that full-year underlying profit before tax would beat the top end of market expectations of £150-160m.