Get Business News

Consumer electronics chain Best Buy Co. Inc. is establishing a foothold in the European market with a $2.1 billion investment in the continent’s largest cell phone retailer, allowing the American company to roll out its trademark big box stores in Europe, the companies said Thursday.
The London-based Carphone Warehouse Group PLC will put its 2,400 Carphone Warehouse and Phone House stores in Europe into the new joint venture.
In a conference call with analysts, the companies said they have been speaking for four years and have collaborated for two, developing the Best Buy Mobile concept for Best Buy stores in the U.S., and bringing Best Buy’s Geek Squad, a 24-hour computer support task force, to Europe.
“We are partnering with an incredibly powerful and incredibly successful organization,” said Charles Dunstone, chief executive of The Carphone Warehouse.
Executives from both companies declined to say how many Best Buy stores will open in Europe, or in which markets, because they didn’t want to tip off the competition. However, they did say the stores will come in a range of sizes and will start opening next year.
Brad Anderson, chief executive of Best Buy, based in Richfield, Minnesota, said they will maintain Best Buy’s reputation for aggressive price competition.
Carphone Warehouse’s current European retail management team initially will remain in place, supplemented by additional personnel from Best Buy as the joint venture develops, the companies said.
RBC Capital markets analyst Scot Ciccarelli wrote the deal offers Best Buy “an intelligent and low-risk strategy to enter the European market,” rather than starting from scratch.
He noted that Carphone Warehouse gets to keep its international business, receives an injection of cash to pay down debt and invest in operations, and will benefit from Best Buy’s consumer electronics experience. RBC rates Best Buy stock a “top pick,” its highest rating.
But Bank of America Equity Research analyst David Strasser, who has a “neutral” rating on the stock, wasn’t enthusiastic. He wrote that Best Buy is “taking on significant exposure and balance sheet risk, at a time of increasing uncertainty in both the electronics industry and the broader retail environment.”
However, he noted that the companies know each other well, and Best Buy will be entering the European market with a proven local partner. He said the accelerated rollout of Best Buy Mobile now planned for all Best Buy stores this year will be a strong improvement from Best Buy’s previous wireless program. It could hurt U.S. competitor Radio Shack Corp.
But Strasser questioned the timing of the deal.
“Buying exposure in Europe and rolling out Best Buy stores in Europe is risky, in our opinion. … (W)e believe the European consumer is heading into a U.S.-like slowdown after a robust spending period. Second, the success of U.S. retailers in Europe is pretty poor,” he wrote.
Because of the deal, Best Buy is dropping its plan to buy back $800 million worth of its shares in its current fiscal year, which began March 2. The company said it expects the joint venture to add about $5 billion to its revenues and 5 cents to 7 cents per share to earnings for the year.
The Carphone Warehouse Group will continue as sole owner of its fixed line telecoms business in the United Kingdom, which includes TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture.
Carphone Warehouse shares fell 3.4 percent to 289 pence ($5.65) in London. Best Buy shares fell $1.41 cents, or 3.3 percent, to $42.04 in afternoon U.S. trading.
The deal is subject to approval by Carphone Warehouse shareholders at its annual general meeting in August. It’s expected to close by the end of August.
Associated Press writer Robert Barr contributed to this report from London.
On the Net:
Carphone Warehouse: http://www.cpwplc.com
Best Buy: http://www.bestbuy.com

via AOL

LONDON - Best Buy Co. Inc., the biggest U.S. electronics retailer, is paying $2.1 billion for a 50 percent stake in Europe s largest cell phone retailer, the companies announced Thursday.

The Carphone Warehouse will place its 2,400 U.S. and European stores in the new joint venture.

The deal also includes the web and direct businesses of The Carphone Warehouse, the insurance operations, and its airtime reselling businesses.

The Carphone Warehouse will continue as sole owner of its fixed line telecoms business in the United Kingdom, which includes TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture.

U.K.-based Carphone Warehouse said it would use the proceeds to pay down debt, invest in broadband customer growth, infrastructure and other areas. Its current European retail management team initially will remain in place, the companies said.

Carphone Warehouse shares fell 2.4 percent to 292 pence ($5.73).

Collins Stewart analyst Mark James retained his buy recommendation on the company, saying the price of the deal gave an implied valuation of 2.2 billion pounds ($4.3 billion), ahead of the brokerage s 1.9 billion pound ($3.7 billion) valuation.

However, JP Morgan lowered The Carphone Warehouse to neutral from overweight, citing limited share price upside on a 3-6 month view.

It said the Best Buy deal raised several concerns, such as the rationale of investing in consumer electronics retailing, the potential use of proceeds, and the impact on the company s financials.

Charles Dunstone, chief executive officer of The Carphone Warehouse, said the companies had been working together for two years.

It is clear that we have very complementary cultures, skills and assets it s a perfect match, Dunstone said. It is also clear that we have a significant opportunity for incremental growth in our retail business which we can best realize with Best Buy on board.

The two companies worked on developing Best Buy Mobile, and have been collaborating to bring Geek Squad, a 24-hour computer support task force, to European markets.

We believe our combined expertise has potential to result in significant financial upside as we together attempt to transform retail in Europe through the Carphone Warehouse, Phone House and Best Buy brands, said Brian Dunn, president and chief operating officer.

The deal is subject to approval by Carphone Warehouse shareholders at the annual general meeting in August.

Best Buy is headquartered in Richfield, Minn.

via MSN

MINNEAPOLIS - Best Buy, the largest U.S. consumer electronics chain, has moved into Europe with a $2.1 billion investment in the continent’s largest cell phone retailer, the companies announced Thursday.

Best Buy’s 50 percent stake in a joint venture with Carphone Warehouse Group PLC will allow it to roll out its trademark big box stores in Europe, with the London-based company putting its 2,400 European stores into the new operation.

In a conference call with analysts, the companies said they have been speaking for four years, and have collaborated for two, developing Best Buy Mobile in the U.S., and bringing Best Buy’s Geek Squad, a 24-hour computer support task force, to Europe.

“We believe our combined expertise has potential to result in significant financial upside as we together attempt to transform retail in Europe through the Carphone Warehouse, Phone House and Best Buy brands,” said Brian Dunn, president and chief operating officer of Carphone Warehouse.

Brad Anderson, chief executive of Richfield-based Best Buy, said the companies share similar cultures and customer-related skills. He said the joint venture will allow Best Buy to grow.

Citing competition, executives declined to say how many Best Buy stores would open in Europe, or where, but did say the stores would come in a range of sizes.

The stores will also compete aggressively on prices, Anderson said.

“With the name Best Buy we have a commitment we have to live up to,” he said.

The joint venture also includes the Web and direct businesses of The Carphone Warehouse, its insurance operations, and its airtime reselling businesses.

The Carphone Warehouse Group will continue as sole owner of its fixed line telecoms business in the United Kingdom, which includes TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture.

It said it would use proceeds from the deal to pay down debt, invest in broadband customer growth, infrastructure and other areas. Its current European retail management team initially will remain in place, the companies said.

Collins Stewart analyst Mark James retained his buy recommendation on the company, saying the price of the deal gave an implied valuation of $4.3 billion, ahead of the brokerage’s $3.7 billion valuation.

It said the Best Buy deal raised several concerns, however, such as “the rationale of investing in consumer electronics retailing, the potential use of proceeds, and the impact on the company’s financials.”

Carphone Warehouse shares fell 3.4 percent to close at 289 pence ($5.67) in London. Best Buy shares fell $1.12, or 2.6 percent, to $42.33 in afternoon trading.

In a research note, RBC Capital markets analyst Scot Ciccarelli said the deal offers Best Buy “an intelligent and low-risk strategy to enter the European market,” rather than starting from scratch.

He noted that Carphone Warehouse gets to keep its international business, get an injection of cash to pay down debt and invest in operations, and that it will benefit from Best Buy’s consumer electronics experience.

JP Morgan lowered The Carphone Warehouse to neutral from overweight, citing limited “share price upside on a 3-6 month view.”

The deal is subject to approval by Carphone Warehouse shareholders at its annual general meeting in August.

___

Associated Press writer Robert Barr contributed to this report from London.

___

On the Net:

Carphone Warehouse, http://www.cpwplc.com/

Best Buy, http://www.bestbuy.com/

via MSN