A combination of Dixons, Europe's No. 2 electricals retailer, and
Carphone, Europe's largest independent mobile-phone retailer, would
create a group with about 2,900 stores across the continent which
would probably find a place in Britain's FTSE 100 index of leading
"The boards of Dixons and Carphone Warehouse note the recent
speculation and confirm that the two companies are in preliminary
discussions regarding a possible merger of Dixons and Carphone
Warehouse," the firms said in a brief joint statement to the London
They said the talks were at a "very preliminary" stage and there was
no certainty a deal would occur. They added that no decision had
been reached regarding the structure of any merger.
Analysts said an all-share merger of equals seemed the most likely
deal. At their closing prices on Friday, Carphone was valued at 1.77
billion pounds, Dixons at 1.72 billion pounds. Shares in Dixons were
up 7.9 percent at 1349 GMT, Carphone's were up 5.7 percent.
Britain's Takeover Panel will require the companies to announce by
March 24 a firm intention to make an offer.
"In a world of connected devices, Dixons is under-exposed to the key
area of mobile/smartphone retailing, and it is known that they were
looking at the area," said independent retail analyst Nick Bubb. "It
is a bold move for Dixons; it is slightly harder at this stage to
see what's in it for Carphone."
Other analysts pointed to buying and head-office cost savings.
Discussions on a merger probably evolved, they said, from talks on
Carphone replacing Phones4U, which operates outlets in some Dixons
Dixons Chief Executive Seb James has made no secret of his desire to
increase the company's exposure to mobile phones.
Strong demand for smartphones and tablets in Britain has been
driving Carphone's share price rise, offsetting weakness in its
French business, and the firm has high hopes for 4G superfast mobile
Analysts said key to any deal would be the stance taken by Charles
Dunstone, who founded Carphone in 1989, and David Ross, who together
own a third of the firm's equity.
Dunstone is Carphone's chairman and its largest shareholder with
23.5 percent. Ross, who is no longer involved in the running of the
company, holds 9.8 percent.
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Analysts said James would be favored to be CEO of the merged group,
with Carphone CEO Andrew Harrison reporting to him and Dunstone as
"There are some big beasts here to keep happy, and history would
suggest that somebody's nose will be put out of joint," Bubb said.
Shares in Dixons, which trails Metro's <MEOG.DE> Media-Saturn by
annual sales, have soared 74 percent over the last year, ahead of
gains of 51 percent in Carphone Warehouse's stock and against the 21
percent rise posted by Britain's midcap index <.FTMC>, of which they
are both constituents.
Dixons, home to the Currys and PC World chains in Britain, Elkjop in
Nordic countries and Kotsovolos in Greece, has increasingly focused
on markets where it has a leading "multi-channel" position with a
combined stores and internet business.
Over the last year, it has offloaded the loss-making e-commerce
business PIXmania and operations in Turkey and has partially exited
U.S. retailer Best Buy <BBY.N>, having abandoned plans to build a
chain of European megastores, ended a joint venture with Carphone
Warehouse last April by selling its stake back to the European firm.
Carphone's brokers are UBS <UBSN.VX> and Deutsche Bank <DBKGn.DE>
and its advisers are Credit Suisse <CSGN.VX>. Dixons' broker is
Barclays <BARC.L> and Citigroup <C.N> its adviser. ($1 = 0.5993
(Reporting by James Davey; additional
reporting by Brenda Goh, Sarah Young and Anjuli Davies; editing by
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