Monday 24 February 2014

Carphone Warehouse in merger talks with Dixons to create £3.5bn electrical goods giant

Carphone Warehouse is in merger talks with Dixons Retail to create an electrical goods retailer giant with a market capitalization of more than £3.5bn.

I understand the talks between Dixons and Carphone Warehouse have reached a relatively advanced stage.

As a result, it’s possible both companies may have to confirm my story on the regulatory news service following the publication of this article.

My sources also tell me that Carphone Warehouse, which was set up by the entrepreneur Sir Charles Dunstone in 1989, are discussing an all-share merger.

However, it is not clear whether Carphone Warehouse, which is just about the larger of the two companies, will have to pay a premium for Dixons.

As of last Friday, Carphone Warehouse had a market capitalization of £1.8bn while Dixons was worth £1.7bn.

There has been plenty of speculation about a merger of both companies in the past as a combination of both companies makes a lot sense.

Indeed, In 2011 Mark Kleinman – a an old colleague from my time at The Daily Telegraph and now City editor of Sky News – wrote that Carphone Warehouse and Dixons had been in merger talks.

According to Kleinman, discussions had reached such an advanced level that Carphone Warehouse and Dixons had even created a new board for the business. 

My sources tell me there are a huge amount of “synergies” to be had from any merger, especially as Dixons has made no secret of its desire to boost its mobile offering.

A merger of Carphone Warehouse and Dixons may also catapult the newly combined business, with a market capitalization of more than £3.5bn, into the FTSE 100 index. 

I understand Sir Charles, Carphone Warehouse’s largest shareholder with 23.4pc, is enthusiastic about the merger deal as it will give him smaller stakes in a bigger, more liquid company.  

David Ross, who helped Sir Charles set up Carphone Warehouse, is the company’s second largest shareholder with 9.7pc.

To be clear, I haven’t yet spoken to either Carphone Warehouse’s or Dixon’s financial public relations advisers although I have contacted them and I am waiting for a reply. I am expecting “no comment” from the public relations advisers.


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