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By | Paul Kunert 24th February 2014 14:03

Dixons Retail and Carphone Warehouse mull merger

Will Currys owner smear its badness over CW?

Dixons and Carphone Warehouse (CPW) today confirmed they are locked in negotiations that may or may not lead to a merger.

"These discussions are at a preliminary stage and there can be no certainty that a transaction will be forthcoming," the pair said in a joint statement this morning.

As such, no decision has been made regarding the structure of the operations and both parties are being treated as "offeree" companies.

Under stock market regs, the retailers have until the close of play on 24 March to go public on whether either party intends to make an offer or not.

The financial markets clearly approve of a tie-up between Europe's second largest CE players and the chunkiest independent shifters of mobes, as both stocks were up.

Dixons shares were trading up 9.63 per cent at the time of writing (12.23) giving it a market cap of £1.89bn, and CPW's valuation was £1.8bn, up 2.45 per cent.

Things are looking better for High-street outlet Dixons, which after wobbles in 2008 when credit insurers withdrew limits on fears that the company was going to go pop.

Former CEO John Browett kept the wolves from the door by embarking on a mass cost cutting programme, and then moved to refit stores and exit loss-making operations in Europe.

The demise of some rivals, most notably Comet, also helped the retailer rebuild sales in recent years, and Dixons reckons its multi-channel approach to flogging gear is paying dividends.

The retailer also rid itself of a mistake by offloading PIXmania last year to a German VC along with £59m worth of working capital.

In fiscal '13 ended 28 April, Dixons posted sales of £8.21bn, up four per cent year-on-year as pre-tax profits leapt 15 per cent to £94.5m.

CPW's last flirtation with a CE retailer, a joint venture in Europe with Best Buy, was a £200m experiment that was shuttered in late 2011.

At the time, the pair said they were unable to continue ploughing money into store expansion as recession-smacked consumers had run dry of any discretionary spending.

In the year to 31 March 2013, CPW reported an 11 per cent spike in turnover to £3.694bn (like-for-like revenue was up 4.6 per cent). Profit after tax was £102.2m, up from £96.6m. ®

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