15th May 2014 07:19
LONDON (Alliance News) - Electronics retailer Dixons Retail PLC and mobile phone retailer Carphone Warehouse Group PLC confirmed Thursday that they will merge in a 50/50 all-share merger.
In a statement Thursday, Carphone Warehouse said the merged group will be called Dixons Carphone PLC, in what it said will create "a leader in European consumer electricals, mobiles, connectivity and related services".
Dixons and Carphone Warehouse are of almost equal size, each with a market capitalisation of about GBP1.8 billion, which led analysts and investors to question who would be taking the driving seat after the companies confirmed they were in merger talks at the end of February.
The companies said that the merger will result in the shareholders of the two existing companies each holding exactly 50% of the new merged entity, on a fully diluted basis, which it said will take into account existing share options and award schemes for both companies.
Under the terms of the merger, Dixons shareholders will receive 0.155 of a new Dixons Carphone share, in exchange for each Dixons Retail share.
"The boards of Carphone and Dixons believe that the merger will deliver significant value to shareholders through a combination of enhanced commercial opportunities and operating synergies," the companies said in a statement.
The companies said that having reviewed the potential synergies of the merger, they believe that the new firm Dixons Carphone will be able to achieve integrated mobile retailing and procurement synergies, together with cost savings, of at least GBP80 million on a recurring basis, which it said it expects to deliver in full in the financial year 2017/18, and almost half by the financial year 2015/16.
On the new board, the companies said that current Carphone Warehouse Chairman Charles Dunstone will become the chairman of Dixons Carphone, while Carphone Warehouse Deputy Chairman Roger Taylor and Dixons Retail Chairman John Allan will become co-deputy chairmen.
Dixons Chief Executive Sebastian James will become CEO of the the new company, while Carphone Warehouse Chief Executive Andrew Harrison will become deputy CEO, it said.
Both companies have been performing relatively well in a UK retail market characterised by tough competition, particularly from online commerce, and still cautious British consumers, who have seen average wages decline in real terms since the financial crisis.
Dixons Retail's recent success was lifted by the departure of struggling UK electrical retail chain rival Comet, which went into administration at the end of 2012. It has also continued to restructure, shedding loss-making businesses such as Pixmania in France, Electroworld in Turkey and Unieuro in Italy. Dixons has reacted to the challenge of online competitors by slashing costs, and bringing down the costs of its own goods, while also improving its own online platform.
The two companies said Thursday that all the proposed directors on the new board have given a binding undertaking not to dispose of any the shares of Dixons Carphone that they hold on admission of the new entity to trading, or subsequently acquire during the lock-in period, for a period of 24 months following completion.
"Carphone and Dixons have put in place appropriate banking facilities to ensure that Dixons Carphone will have a strong financial profile following completion, which will enable the combined Group to retain flexibility whilst reviewing its optimal capital structure going forward," the companies said in a statement.
The Dixons Carphone merger is conditional on the approval of shareholders from both companies and on normal regulatory approvals and anti-trust clearances.
"Coming together when both companies are flourishing, we will create a stronger business for our customers, colleagues and shareholders - for now and the future," said Dixons Retail Chairman John Allan in the statement.
In a separate statement Thursday, Dixons Retail said that underlying sales were up 3% in the year ended April 30, as well as on a like-for-like basis. It said it expects to report full-year underlying pretax profit to be at the top end of market expectations of GBP150 million to GBP160 million.
At the open Thursday, Dixons shares were up 1.6% at 51.70 pence, while Carphone Warehouse shares were up 2.4% at 335.576 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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