Less Carphone, more Warehouse for Dunstone

The Carphone Warehouse's £1.1bn tie-up with Best Buy is big news if you like plasma TVs...

Last Updated: 06 Nov 2012
This morning The Carphone Warehouse announced a new £1.1bn joint venture with Best Buy, the US market leader in consumer electronics. The idea is that Best Buy will get a 50% stake in Carphone’s retail business across the UK and Europe, which it can use as a platform to launch the large-format retail concept that has proved so successful in the US (it has a market share of about 20%). So it shouldn’t be too long before you can drive to an enormous out-of-town Best Buy store near you, and fill your boots with laptops, camcorders and flat-screen TVs to your hearts’ content.
The move hasn’t exactly come out of the blue. Carphone Warehouse has already teamed up with Best Buy for two previous joint ventures: the opening of Carphone mobile shops in Best Buy’s 900 US stores, and also the launch of tech support service The Geek Squad. So boss Charles Dunstone, the man who built Carphone from a tiny operation into a FTSE 100 powerhouse, will presumably know exactly what he’s letting himself in for - in fact, their arrangement has been working out so nicely that there were rumours he might even sell them the whole company.
However, he clearly had a much better deal lined up. This way Carphone gets a 50% stake in the retail venture, while leaving its basic ownership structure unchanged – so Dunstone (who has a stake of about 30%) should be sitting pretty whatever happens. The £1.1bn cheque will also give him a handy war chest to pay down debt (always handy when the credit markets are rocky) and possibly fund new acquisitions (he’s already been linked with a bid for Tiscali).
But it’s certainly a bold move by Dunstone. Admittedly it’s a long time since he last sold a carphone, but this tie-up takes him even further from his roots (though he might at least have a few warehouses now). And trying to crack an established market like this – particularly at a time when consumer spending is slowing and all the retailers appear to be struggling – will be no mean feat. Still, he’s never been short of ambition. Let’s just hope this goes a little more smoothly than his free broadband offer a couple of years ago, when unexpectedly high demand almost knocked his company for six.
Of course not everyone’s likely to be celebrating about the news. UK retailers like Dixons owner DSG and even Tesco could be forgiven for a collective groan at the news that the biggest beast in the US electronics jungle wants to come and eat their breakfast. But for the rest of us, more competition should hopefully mean cheaper TVs. Hurrah!

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