UK's Dixons, Carphone Warehouse in merger talks

Mon Feb 24, 2014 1:26pm EST
 
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By James Davey

LONDON (Reuters) - Britain's Dixons Retail DXNS.L and Carphone Warehouse CPW.L are in merger talks that could create an electrical goods and mobile-phone group with a market capitalization of more than 3.4 billion pounds ($5.84 billion).

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 companies.

"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 Stock Exchange.

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 stores.   Continued...

 
A sign is seen outside the Carphone Warehouse's store on Oxford Street in central London April 30, 2013. REUTERS/Andrew Winning