Carphone Warehouse and US giant Best Buy have created a joint venture likely to become one of the biggest electricals retailers in Europe.

Best Buy is to acquire 50 per cent of Carphone's European and US retail business for£1.1 billion and the pair will open supermarket-sized Best Buy stores across Europe. The deal will strike fear in the heart of beleaguered electricals retailer DSGi and transform the electricals market.

Carphone Warehouse chief executive Charles Dunstone said: “Today’s announcement marks the next big step in Carphone Warehouse’s growth story.”

He added: “It is also clear that we have a significant opportunity for incremental growth in our retail business, which we can best realise with Best Buy on board. Best Buy brings demonstrable expertise in merchandising, sourcing and customer service, which should help us accelerate the evolution of our business towards the broader connectivity market. We bring local knowledge, infrastructure and expertise in linking services to product, which should help them push into larger format consumer electronics retailing in Europe.”

The assets of the newly formed company will comprise Carphone Warehouse’s existing retail business, operating from more than 2,400 stores in nine European countries under the Carphone Warehouse and Phone House brands, and Carphone Warehouse’s share of its existing relationships with Best Buy.

The deal will also grant Carphone Warehouse a war chest to fund acquisitions and pay down its debt. Carphone Warehouse is expected to launch a bid for the UK arm of broadband company Tiscali, which is up for sale.

Carphone Warehouse chief executive Charles Dunstone will retain his minority stake of just over 30 per cent, leaving the ownership structure of the business unchanged.

Best Buy reported revenues of US$40 billion (£20.49 billion) in the 2008 financial year, with an operating income of US$2.2 billion (£1.13 billion). It operates 1,314 stores in the US, Canada and China.

The three aims of the joint venture are:

  • To grow Carphone Warehouse’s retail business through expansion in its existing European markets, the acceleration of the present evolution towards mobile and fixed-line connectivity, growth in private-label products and the realisation of benefits from joint purchasing, joint sourcing and merchandising optimisation.

  • To build a significant market share in consumer electronics retailing in Europe through the roll-out of Best Buy stores, services and web sites in selected markets, beginning in the calendar year 2009.

  • To bring to Best Buy’s core North American operations Carphone Warehouse’s expertise in sourcing mobility products, bundling services and operating smaller stores, thereby enhancing and diversifying Best Buy’s skill set for improving its customer experience.

Carphone Warehouse chief finance officer Roger Taylor, who is expected to become chief executive of the venture while maintaining his present role, said: “The proceeds from the transaction give us the power and flexibility to maximise the value of our fixed-line business and enhance its scale and profitability.”

Best Buy international chief executive and chief information officer Bob Willett is anticipated to be chairman of the venture. He said Best Buy would apply its business model to the new market “carefully and with humility”. He said: “We have seen great companies fail because they thought they could simply export their present business model to new geographies. We intend to plan our European entry strategy carefully, focus on customer needs and with on-the-ground help from our trusted partner Carphone Warehouse.”

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