Britain's Dixons Retail has announced that it is in merger talks with Carphone Warehouse to create a joint electrical goods and mobile-phone group. The merger would create a group of around 2,900 stores across Europe with a market capitalisation of more than £3.4 billion.
The news of the possible merger of Dixons, Europe's No.2 electrical retailer, which owns more than 500 Currys and PC World stores in the UK and Ireland, and Carphone Warehouse, Europe's largest independent mobile-phone retailer which operates over 2,000 stores across Europe saw shares in both companies jump yesterday. Dixons Retail was up 7.5 per cent while Carphone Warehouse climbed 6 per cent. The combination of the two firms is also very likely to see the merged company finding a place in Britain's FTSE 100 index of leading companies.
However both companies have declared that the talks are at a very early stage and no decision has been made on the structure of the deal as yet. "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," announced the companies, according to BBC news. "These discussions are at a very preliminary stage and there can be no certainty that a transaction will be forthcoming. No decision has been reached regarding the structuring of any such merger."
According to Sky News, the chief executive of Dixons Retail, Sebastian James, is in line to head the merged high street group if the talks result in a deal. Infromation from a source close to Dixons also mentioned that a transaction would be structured as a merger of equals. We may also see Carphone co-founder Sir Charles Dunstone becoming chairman of the combined group, with a deputy chairman's role possibile for Dixons Retail chairman, John Allan. The Sky News source added that Carphone's chief executive, Andrew Harrison, would be likely to take on a role as deputy chief executive or chief operating officer of the combined group.
It may be interesting to note that this is not the first time the two companies have held talks regarding a deal. Previous discussions in 2011 fell through due to the gap between the valuations of the two companies at that time. An analyst talking to the BBC still feels that Dixons would be getting a better deal out of the merger than CPW, due to the buoyancy of the mobiles market. However CPW would obviously enjoy being able to remove the Phones4U stores-in-stores at PC World branches.
The two companies will now be required to put forward merger plans by 5pm on 24th March, as required by the Britain's Takeover Panel, if the deal is to go ahead. Has anyone got any suggestions for the merged businesses name?