Carphone weds again – and 'this time it's for life'

Dixons' chief executive Sebastian James has backed his companies' proposed £3.8bn merger with Carphone Warehouse to rise above the graveyard of failed retail unions.

The retail duo announced plans for an all-share "merger of equals", which will create an electronics giant called Dixons Carphone with 3,000 shops across Europe yesterday.

Mr James, who will head the new company with Carphone's chairman Sir Charles Dunstone holding the same position in Dixons Carphone, said: "A lot of people marry at haste and repent at leisure but neither company has deal fever. If ever there was one that was going to succeed I think it's this one."

Retail's chequered history of mergers includes Carphone's failure with US giant Best Buy – and the disastrous unions of Morrisons and Safeway and the Co-op and Somerfield.

Carphone's ill-fated venture with Best Buy in 2008 ended when the US group retreated in 2011 to fight intense competition from online players in the States and Dixons in the UK.

Carphone's chief executive Andrew Harrison, who will become deputy chief executive of the new company, said: "Best Buy was a different era – it was trying to build market share at a difficult economic time. Today two flourishing market leaders are coming together."

Mr James added: "You have to hold your nose and jump in. We are believers that the difference between connected services and other devices is now nothing. I'm happy to be the blushing bride today.

"With Best Buy we walloped them and that was great fun. This is different. We are the market leader and we are marrying at a time when both businesses are flourishing."

The City was not convinced, with Dixons, which owns Currys and PC World, falling 10 per cent to 45.67p and Carphone off 8 per cent at 301.3p. Jasper Lawler, an analyst at CMC Markets said: "Dixons is pretty much the same business model as Best Buy. Investors are probably thinking there's not a good history of cost saving here."

Mr Dunstone said the deal creates a "new retailer for the digital age". He will hold about 12 per cent of the new company if the merger is approved.

The merger has created an unusually crowded boardroom with Sir Charles, Mr James and Mr Harrison joined by two deputy chairmen, chief financial officer Humphrey Singer, two executive directors and six non-executives.

Sir Charles and Mr James believe selling through each other's stores will allow them to fight off low-price online players such as Amazon and AO World. They hope to strip out £80m of costs by 2018 as they combine their assets, cut rents and buy products from suppliers together.

The retailers, who employ 43,000 staff, estimate 860 jobs will be axed when they merge head offices but 1,700 created, largely on the shop floor.

Dixons also yesterday posted a 3 per cent rise in fourth-quarter like-for-like sales and said full-year underlying profits will be around £150m.