Carphone Warehouse finalises breakaway from Best Buy with cut-price deal

 

Carphone Warehouse delighted the City today by regaining full control of its High Street business from US giant Best Buy, paying less than half of what it received for the stake in 2008.

The company announced it will spend £471 million buying back the 50 per cent stake, having sold it to Best Buy for £1.1 billion. Shares in Carphone surged almost 13 per cent as analysts reckoned chairman and co-founder Sir Charles Dunstone had done a canny deal.

His company will pay Best Buy £341 million in cash and £80 million in shares, plus a further £50 million in cash later, for the half-share in the retail arm, called Carphone Warehouse Europe, which has almost 2400 stores.

Carphone will raise the money through £250 million of loans and around £171 million in shares. About £91 million in shares were being placed today with City institutions, with the remainder going to Best Buy.

Analysts have suggested the deal could boost earnings at Carphone by 30 per cent from this year.

The divorce from its American partner contrasts with Tesco’s recent withdrawal from the country when it called time on its Fresh & Easy convenience format. The sale marks the end of a five-year relationship when Best Buy first bought its 50 per cent stake in Carphone Warehouse Europe and the two companies also launched a separate joint venture selling mobile phones in America.

Carphone collected an £838 million windfall in November 2011 when Best Buy bought out its British partner in America, with most of that cash being returned to Carphone shareholders, who include Dunstone with a 28 per cent stake. Now he and fellow shareholders have benefitted again by taking back full control of Carphone Warehouse Europe’s retail business for £471 million — more than £600 million less than Best Buy paid originally for its half-share in 2008.

But Carphone has previously taken a writedown after the ambitious joint plan with Best Buy to bring its American “big box” stores to Europe flopped.

Chief executive Roger Taylor said: “Following the sale of our US interest last year, we have become increasingly responsible for the day-to-day operations of CPW Europe whilst Best Buy have become more focused on their wholly-owned businesses. Both parties have agreed that this is a good time for us to bring the joint venture to an end.”

In addition to retail arm Carphone Warehouse Europe, Carphone has a 46 per cent stake in Virgin Mobile France and a property portfolio.

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