Carphone Warehouse gets £1.1bn investment to begin expansion

May 8 2008

Carphone Warehouse today said it had sealed a £1.1 billion investment from US group Best Buy to launch a joint venture retailer across Europe.

The deal will see Best Buy take a 50% stake in Carphone Warehouse’s high street chain. The pair already have a trading relationship in the US.

Carphone Warehouse will retain its broadband operation and plans to use the cash made from the transaction to further develop its fixed line business and reportedly fund a war chest to snap up struggling rivals.

It is thought that some of the money raised may go towards a potential bid for the UK operations of the broadband firm Tiscali, which has been put up for sale with the deadline for first round bids understood to be today.

Carphone Warehouse confirmed it was looking at Tiscali, but said it was “early days”.

Under the deal with Best Buy, the Carphone Warehouse and Phone House brands will remain high street stores, but the new venture will see larger retail park-sized consumer electronic Best Buy stores launch across both the UK and Europe.

The new outlets are set for roll-out in 2009, although Carphone Warehouse suggested UK consumers may see the brand appear on these shores sooner.

Charles Dunstone, founder and chief executive of The Carphone Warehouse, said: “Today’s announcement marks the next big step in the Carphone Warehouse’s growth story.”

“We have been working closely with Best Buy for nearly two years and it is clear that we have very complementary cultures, skills and assets - it’s a perfect match. It is also clear that we have a significant opportunity for incremental growth in our retail business which we can best realise with Best Buy on board.”

The two companies have already been collaborating to bring Geek Squad, a 24-hour computer support task force, to European markets, while Carphone Warehouse has also been working with Best Buy on its US mobile phone offering.

Today’s deal will enable Carphone Warehouse, currently comprising around 2,400 retail stores, to enlarge and capture a bigger slice of the consumer electronics market, while it also provides Best Buy with a platform to expand into Europe - a market worth around £89 billion.

Best Buy employs around 150,000 staff across 1,314 stores across the US, Canada and China, producing annual revenues of 40 billion US dollars (£20.5 billion).

The deal, which has yet to be approved by shareholders, will see the Carphone Warehouse retail management remain in place.