Shares jump on Carphone and Dixons merger talks

Merger could create a multi-billion pound High Street giant

Carphone Warehouse and Dixons are considering a merger that would create one of the biggest technology companies on the high street, as both businesses hope to tap into customers’ demands for one-stop shops for all their electrical needs.

Management now have until 24 March to agree a deal or walk away. Carphone Warehouse is keen to expand its range and reach as the market around mobile phones, tablets and computers becomes blurred, while Dixons, which operates as Currys PC World, wants to increase its mobile phone offering and to build on the customers it gained following Comet’s demise.

Analysts and investors welcomed the deal, as shares in both companies soared. Dixons closed up 6.7 per cent at 50.3p and Carphone Warehouse was up 8.8 per cent at 333p. The merged company would be worth more than £3.5bn and has the potential to dominate parts of Europe.

Dixons currently controls 22 per cent of the electricals market in the UK, 11.1 percentage points more than its next biggest rival Argos, according to analysts at Verdict. The electricals market is expected to grow by 3.3 per cent this year – the highest rate of growth since the recession.

Both companies remained tight-lipped, confirming only that discussions were taking place; however, Dixons boss Sebastian James said: “We’ve said for some time we’ve wanted to get into the phone market and this is one of four options we’ve seen... We can’t say who approached who, but obviously it’s a small industry and we all know each other well.

“We already have concession with Phones 4u in our stores, which are great, but we have always said we need to expand into the phone market even more.”

It is understood the Phones 4u contract is coming to an end later this year.

Carphone Warehouse founder Sir Charles Dunstone declined to comment when contacted by The Independent, but he did not rule out suggestions that he would become chairman of any merged business.

Matt Rubin, a retail analyst at Verdict, said the deal seemed like a natural fit. He said: “For Carphone Warehouse, it is becoming hard to distinguish between mobile phones, tablets and laptops, which are all merging into one and could continue to go even further in that direction.

“Meanwhile, Dixons has said it wants to improve its phone offer and could also take advantage of Carphone Warehouse’s store portfolio to extend its click-and-collect offer.”

For Carphone Warehouse, the deal could be seen as similar to a joint venture with Best Buy, when the phone service was installed in the US company’s stores. It was eventually bought out by Best Buy for more than £800m and proved highly successful.

But a similar project to launch Best Buy in the UK failed. The man who oversaw the deal with Best Buy was Andrew Harrison – who was subsequently promoted to chief executive of Carphone Warehouse and made clear that he wanted to form similar partnerships elsewhere.

More recently the phone company, founded from a basement flat in 1989 in London, has launched its Connected World business as bosses recognise that customers are keen to use staff’s knowledge and expertise to hook up all their electrical devices over wi-fi, controlled by their smartphones.

Dixons has also focused on its similar Know How business, which aims to advise customers on how to get the most from their computers and tablets, and offers software and hardware support. The company could also benefit from Carphone Warehouse’s high levels of customer service, which has historically lagged at Dixons.

A link up with Carphone Warehouse and Samsung, for the former to run phone stores for the South Korean mobile giant, could also interest Dixons, which is always keen to form closer relationships with big suppliers – especially Apple rivals because of the low margins made on Apple products by third-party retailers.

Analysts have also suggested that a deal could help douse the flames of excitement from online white goods appliance seller AO.com joining the stock market. Some investors had feared Dixons could lose out from the competition – yet a deal with Carphone Warehouse could see those worries washed away.

A recovery in the housing market – mortgage approvals are at five-year highs – would also be attractive to Carphone Warehouse, with the boost in sales expected at Dixons. 

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Guru Careers: .NET Developer / Web Developer

£45K - £55K (DOE) + Benefits: Guru Careers: We are seeking a full stack .NET D...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence