Minneapolis — Best Buy plans to open its first European stores through a 50-50 joint venture planned with its British wireless partner The Carphone Warehouse.
Under terms of the deal, Best Buy will spend $2.1 billion to acquire a 50 percent interest in Carphone’s 2,400 European stores, its Geek Squad operations in the United Kingdom and Spain, its online and direct businesses, its insurance operations and its airtime reselling businesses.
The venture also covers Best Buy’s planned European stores and Best Buy Mobile, the partners’ two-year-old joint U.S. wireless effort which is being rolled out to all U.S. Best Buy locations this year.
Carphone will continue to own 100 percent of its fixed-line telecoms business in the United Kingdom — comprising TalkTalk, AOL Broadband and Opal — and its share of the Virgin Mobile France joint venture. Separately, Best Buy will continue to hold its 2.9 percent stake in Carphone.
“We believe that we can collapse time, increase our success with consumers and create more shareholder value for both companies by pursuing our goals together,” said Best Buy CEO Brad Anderson. “The Carphone Warehouse offers complementary capabilities as well as local customer insights, and has a similar passion for the customer and employee experience.”
The companies described the European CE market as the fastest-growing retail category on the continent over the past five years and sized the business at about $175 billion. In a conference call this morning, Anderson said the joint venture would leverage the partners’ strengths in demystifying CE technology for European consumers, and that the European Best Buy stores will differ from their American cousins to suit their respective markets.
In a statement, Bob Willett, CEO of Best Buy International and the company’s chief information officer, said, “We’ve been successful with our business model and aspire to apply that model to one of the largest markets in the world. Yet we must do so carefully and with humility. We have seen great companies fail because they thought they could simply export their current business model to new geographies. We intend to plan our European entry strategy carefully, focused on customer needs, and with on-the-ground help from our trusted partner, The Carphone Warehouse.”
Added Brian Dunn, Best Buy’s president and COO: “We have been sharing experiences with The Carphone Warehouse for four years and working closely with them for the last two. Both companies focus on anticipating and meeting the changing needs of customers. Our cultures are similar, and we share a mutual trust and common values. 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. Consumers’ needs, both explicit and latent, are dramatically changing, and we want to capitalize on those. We also intend to make the substantial capabilities of Best Buy fully available to the new venture to ensure its successful growth.”
Carphone’s existing European retail management team will remain responsible for the day-to-day management of the new venture, and will eventually be supplemented by additional personnel from Best Buy as Best Buy’s European stores and Web sites roll out. Willett is expected to be chairman of the new venture, and Roger Taylor, Carphone group chief financial officer, is expected to be CEO in addition to retaining his existing duties.
The new entity’s board will be comprised of equal numbers of Best Buy and Carphone executives, including Charles Dunstone, group CEO of The Carphone Warehouse.
The transaction, which is subject to approval by Carphone shareholders at a general meeting planned for August, is expected to close before Aug. 30. Best Buy does not require shareholder approval, and plans to fund the venture through a combination of cash, existing bank lines and other new borrowing.