Shaun Curry/Agence France-Presse — Getty ImagesThe deal ends a profit-sharing agreement with Carphone Warehouse that Best Buy signed in 2008.
9:53 a.m. | Updated
LONDON — The electronics retailer Best Buy agreed on Monday to pay $1.3 billion for full ownership of a fast-growing American cellphone joint venture from its British partner, the Carphone Warehouse Group.
Best Buy also said it was abandoning plans to expand its so-called big-box stores across Europe as the sovereign debt crisis continued to weigh on consumer spending across the Continent. The company is set to close all 11 of it existing big-box stores in Britain, which employ about 1,000 people.
Under the terms of the deal, Best Buy will take full control of Best Buy Mobile, a cellphone business that has expanded rapidly in North America, partly as a result of the rise of smartphones, including the Apple iPhone. The acquisition is expected to close by March 2012, and will increase Best Buy’s pre-tax profits by up to $140 million in 2013.
“We wanted to use the Best Buy Mobile team to sell connections to consumers,” Best Buy chief executive Brian J. Dunn said on a conference call with investors. “There’s no doubt we can go faster in the U.S. and Canada to unleash the team.”
The deal ends a profit-sharing agreement with Carphone Warehouse that Best Buy signed in 2008 as it sought to expand its presence in the cellphone market. As part of the sale, both companies have the option to buy the other out of their European joint venture, Best Buy Europe, in 2015.
The two companies will continue to work together through a new venture targeted at expanding their cellphone business into emerging markets, particularly China and Mexico.
“We are aggressively ramping up our growing connections capability to support consumers’ increasingly connected lives across the entire range of devices entering the marketplace,” Best Buy’s Mr. Dunn said in a statement. “Over the past four years we have built unsurpassed expertise and depth of offerings in mobile.”
Chris Goodney/Bloomberg NewsA Best Buy store in Manhattan.
The cash influx bolstered Carphone shares, which rose more than 11 percent on Monday in morning trading in London. The share price, however, fell back down by the afternoon and was trading 1.16 percent up at 2:36 p.m. GMT.
The company said the money from the Best Buy Mobile sale would be returned to shareholders.
Carphone Warehouse also announced Monday a 78 percent annual decline in net profit to £5.5 million, or $8.5 million, during the six months through September.
The British firm blamed the drop on Europe’s struggling economy and low consumer confidence.
The tough economic climate also has affected Best Buy. While the company plans to expand its cellphone operations in North America, it has faced cutthroat competition from domestic rivals as well as a deteriorating economic environment that has led many consumers to cut back on spending.
After opening its first British big-box store in 2010, Best Buy had planned to open more than 100 large stores in the country as an initial expansion into Europe. The company said it would now focus on its 2,500 small European stores, mostly to sell cellphones.
The failure to crack the European electronics market follows similar troubles in emerging markets, including Turkey and China, where the company faced tough local competition and ongoing regulatory delays.
Article source: http://feeds.nytimes.com/click.phdo?i=cc9e5607e3d0604a47f0ff776caad0b9
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