Back in February, it was announced that merger talks were taking place between Dixons Retail and Carphone Warehouse. Now, these talks have concluded successfully, with each of the retail powerhouses agreeing to merge in a deal worth £3.8 billion.
Chief executive of Dixons, Sebastian James, confirmed the successful conclusion of the talks whilst revealing the results of the group’s financial year trading performance. Full year underlying sales increased by 3 per cent as a result of growing transactions at both Currys and PC World, while like for like sales, which do not include the impact of new store openings, also rose by 3 per cent.
As a result, Dixons expects full year profit to come in at the upper end of analyst expectations of £150 million to £160 million. Furthermore, Mr James believes that the merger could further improve the group’s long term financial position, as the companies will save £80 million per year from the 2017-2018 fiscal year onwards.
Mr James said; “Today we also announce that we are setting out on a new journey with Carphone Warehouse and it is good to be in such a strong position as we embark on this adventure.
“The ability to take what we have built in electrical retailing and add the profound expertise of Carphone Warehouse here in connectivity would make us a leading force in retailing for a connected world.
“Together we can create a seamless experience for our customers that will enable technology to deliver what it promises – that is, to make their lives better.”
Yet while this merger certainly appears mutually beneficial, there remains some doubt as to what it will mean in terms of employment and commercial property requirements. While Mr James is insistent that no branch closures will take place in either Dixons’ portfolio of 500 UK and Ireland stores, or in Carphone Warehouse’s 2,000 European outlets, he believes that job cuts of around 2 per cent of the mutual workforce will occur “as a result of the rationalisation of certain operational and support functions”.
Carphone Warehouse, on the other hand, forecasts “significant job creation” due to the initial expansion plan agreed by the partnership – the details of which are yet to be revealed. In fact, it believes that the mutual workforce will be expanded by around 4 per cent to cope with an increase in demand.
The question, then, is whether Dixons and Carphone Warehouse will profit from the merger. Conlumino consultant David Alexander believes that only time will tell whether this merger will work in the favour of both parties in the long term.
He says; “Although there are plenty of reasons to view the merger in a positive light, the history of [mergers and acquisitions] is littered with the corpses of failed unions.
“Carphone Warehouse itself is no stranger to this, having seen its partnership with US electronics giant Best Buy in 2008 peter out three years later in the face of intense competition from Dixons.”
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