Retailers shift their ad spending from TV, radio and print ads to digital ads.
A venture between the retailers gives Best Buy better access to European markets via The Carphone Warehouse’s 2,400 stores and its web site. In return Best Buy will help Carphone tap the growing electronics market in select European countries.
The Carphone Warehouse Group PLC and Best Buy Co. Inc. are forming a new business to feed European consumers’ expanding appetite for electronics. The assets of the new 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 Carphone’s share of its existing relationships with Best Buy.
Best Buy will pay Carphone $2.14 billion for a 50% share of the new company against Carphone’s contribution, including its stores; the web businesses -- led by CarphoneWarehouse.com -- and other direct businesses; and its airtime reselling businesses for the remaining 50%.
Carphone is an independent retailer of mobile phones and related services that claims to be the largest dealer in Europe. It markets mobile phones, accessories and network service in the United Kingdom under the Carphone name and as Phone House in other European countries. The company reported its retail business generated $518 million in earnings before income tax, depreciation and amortization on revenue of $5.7 billion in the fiscal year ended in March of 2007.
Electronics retailer Best Buy operates more than 1,300 stores and BestBuy.com, its e-commerce business, which is No. 12 in the Internet Retailer Top 500 Guide. The retail business generated $1.78 billion according to Internet Retailer estimates in 2007, and reported fiscal 2008 revenue of $40 billion.
The transaction, which is subject to Carphone shareholders’ approval at it August meeting, is expected to close during Best Buy’s fiscal second quarter, which concludes on Aug. 30, 2008.
The Carphone Warehouse will retain full ownership of its fixed-line telecommunications business in the U.K., comprising TalkTalk, which sells mobile and landline telecommunications and broadband services; AOL Broadband; Opal, its b2b phone and broadband business; and its share of a joint venture with Virgin Mobile France. Best Buy continues to hold a 2.9% stake in Carphone.
Best Buy International’s CEO and chief information officer Bob Willett is expected to become chairman of the new venture, and Roger Taylor, The Carphone Warehouse’s Group chief financial officer, is expected to be CEO, in addition to retaining his existing duties. The business will be overseen by a board comprising equal numbers of Best Buy and Carphone executives, including Charles Dunstone, Carphone’s group CEO.