In a deal that cost £471m, the Carphone Warehouse now gets to run its business as it pleases – unshackled from a deal with Best Buy five years ago that split the power base of the company. The Best Buy buyout was a failure: the company paid £1.1bn to enter the joint venture back in 2008, and has struggled to turn a profit ever since.
Best Buy’s chief executive Hubert Joly tried to paint a more positive picture. He said: ‘This transaction allows us to simplify our business, substantially improve our return on invested capital, and strengthen our balance sheet.’ He also tried to claim that pulling the plug on its European business does not mean Best Buy has abandoned ideas for expanding into other markets around the world at a later date.
The chief executive of Carphone Warehouse, Roger Taylor, sounded a little more convincing: ‘For us, the transaction will simplify our ownership structure, streamline management decision-making and give us full ownership of our growth opportunities across Europe and other markets around the world.’ It looks like Carphone Warehouse is taking control of its own destiny, and the partnership with Best Buy will be put down to experience.
The deal has been a cinch for Carphone Warehouse because of the price, too. Analysts had been expecting such a buyout (the cost of regaining full control) to cost around £550m in total. In the deal that’s just gone off, it’s £391m cash and £80m worth of shares that Best Buy will now own.
Shareholders obviously agree that the deal has been a good one: the price of shares rose by 13% on Tuesday, making it one of the biggest risers in London trading.