Best Buy Exiting European PactMinneapolis — Best Buy is selling its 50 percent investment in Best Buy Europe, a five-year-old joint venture with Great Britain’s Carphone Warehouse. 4/30/2013 05:41:00 AM Eastern
Minneapolis — Best Buy is selling its 50 percent investment in Best Buy Europe, a five-year-old joint venture with Great Britain’s Carphone Warehouse.
The British cellular chain, which helped launch Best Buy Mobile in the U.S., will purchase the balance of Best Buy Europe for about $775 million in cash and stock, less $45 million in contractual obligations to be paid by Best Buy.
The European joint venture operates stores in eight countries.
Beginning in the first quarter of fiscal 2014, Best Buy intends to report the results of the Best Buy Europe joint venture in discontinued operations and will record a $200 million non-cash asset impairment charge that will be written off at the time of closing.
Best Buy’s European venture has struggled in recent years amid the weak economy, forcing 11 store closures in 2011. Projected revenue for fiscal 2014 is about $5.5 billion, and adjusted diluted earnings per share are expected to be “immaterial,” the companies said.
“After reviewing the business and spending time with our partners, we concluded that the timing and economics were right to enter into this agreement with CPW,” said Best Buy president/CEO Hubert Joly. “This transaction allows us to simplify our business; substantially improve our return on invested capital, one of the five pillars of our Renew Blue transformation; and strengthen our balance sheet.
“Each international market is different and the sale of our European operations should not suggest any similar action in our other international businesses,” Joly added.
In 2011 Best Buy bought out Carphone Warehouse’s share of the profits from the partners’ Best Buy Mobile joint venture in the U.S. and Canada, and agreed to pay Carphone an annual consultancy fee of 5 million pounds for five years.