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Dixons Retail to merge with Carphone in a 3.8bn pounds deal

May 15, 2014

LONDON - Dixons Retail, Europe's largest specialist electrical retailer, and Carphone Warehouse, mobile phone retailer, Thursday announced merger plans in a deal worth 3.8billion pounds.

Under the terms of the deal the new merged entity will be called Dixons Carphone, with ownership split equally between the two firms' shareholders.

Dixons, which operates more than 500 Currys and PC World stores in the UK and Ireland, expects to slash around two percent of the jobs as a result of the merger, which will create a new High Street giant.

Carphone Warehouse operates more than 2,000 stores across Europe.

In February, the two firms had disclosed that they were in talks about a tie-up.

"Carphone and Dixons are both experienced operators with significant knowledge and expertise. The integration of the two businesses will be managed by a dedicated integration team, bringing together the best relevant capabilities of both businesses, with the aim of facilitating a smooth integration," the companies said in their joint statement Thursday.

The two companies plan to merge their merchandise in the retail outlets with the aim of reducing the number of stores. . The companies also aim to roll-out the biggest click-and-collect network for technology products across the UK.

"Simply having stores that just sell mobile handsets, or simply selling electrical goods or handsets that can communicate with other devices but not solving the issue of making them communicate, is actually missing the point for customers. So what we are trying to do here quite simply, is anticipate the issues and needs that customers have," Carphone Warehouse Chairman Charles Dunstone said at a press conference in London.

Dixons chief executive Sebastian James announced the deal while reporting 3percent rise in the full-year underlying sales and like-for-like sales, stripping out the effect of new store openings, were also up 3%.

Dixons expects its full-year profit to be between 150million pound to 160million pounds, which is "at the top end of market expectations".

"Today we also announce that we are setting out on a new journey with Carphone Warehouse and it is good to be in such a strong position as we embark on this adventure," said James.

"The ability to take what we have built in electrical retailing and add the profound expertise of Carphone Warehouse in connectivity would make us a leading force in retailing for a connected world.

"Together we can create a seamless experience for our customers that will enable technology to deliver what it promises - that is, to make their lives better."

The merger is expected to result in savings of 80 million pounds annually for the companies from the 2017-18 fiscal year onwards, Dixons said.

He said the aim was to exploit the soaring number of devices connected to the internet, since Dixons sold them and Carphone Warehouse connected them.

The merger is not expected to result in the closure of any branch, James stated.

The Dixons Carphone merger is conditional on the approval of shareholders from both companies and on normal regulatory approvals and anti-trust clearances. Provided all necessary approvals are in place, it expects the merger to become effective by the third quarter of the current financial year.

Analysts expressed scepticism about the proposed link up while the market reacted adversely with Dixons's share dipping 10.3% on the news, while Carphone Warehouse shares were down 8%.

David Alexander, consultant at Conlumino, said: "Although there are plenty of reasons to view the merger in a positive light, the history of [mergers and acquisitions] is littered with the corpses of failed unions.

"Carphone Warehouse itself is no stranger to this, having seen its partnership with US electronics giant Best Buy in 2008 peter out three years later in the face of intense competition from Dixons."

Dixons Retail owns the Elkjop group in the Nordic region and the Kotsovolos retail business in Greece.

Last year, Dixons Retail sold its loss-making online retail business Pixmania to German industrial group Mutares.

It has also disposed of subsidiaries in Italy and Turkey, as part of its strategy of "focusing on markets where we are leaders".

For more stories covering the world of technology, please see HispanicBusiness' Tech Channel

Source: Big News Network (United Arab Emirates)

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