DIXONS Retail and Carphone Warehouse shares slid into the red yesterday after the high street giants’ plans for a £3.8bn merger was given a mixed reception.
The new group, which will be named Dixons Carphone, aims to exploit the ever-growing presence of smartphones in people’s lives and the so-called internet of things – where household appliances are connected to the internet.
With Carphone’s expertise in smartphones and Dixons’ appliances and customer service platform KnowHow, the group aims to offer everything from the products and the technical support to the services such as broadband and the subscription to Spotify or Sky.
This could even include offering customers heating, lighting and security systems – all connected to the internet and their mobile devices.
Some analysts expressed fears over the merger given the size of their estates and Carphone’s history with Best Buy. Some also argued the deal was more compelling for Dixons.
But Dixons CEO Sebastian James insists the two companies could not have been a “better match”.
“At no time during this process have either company got deal fever. Mergers are difficult – if ever there was one that was going to succeed I think it is this one,” he said.
The merger will see the shareholders in both retailers given equal ownership in Dixons Carphone, which will have combined revenues of £11bn, 2,950 stores and 43,000 employees.
Carphone Warehouse founder and 23.5 per cent shareholder Sir Charles Dunstone will become chairman of the group. Dixons boss James will be chief executive while Carphone’s Andrew Harrison will be deputy chief executive.
The companies said the merger will create £80m of cost savings from 2016-17, with almost half expected to be delivered in 2015-16. There will also be one-off costs £55m-£60m.
Around 850 jobs are at risk but James said around 1,600 jobs are expected to be created over next two years as the company rolls out Carphone stores with the larger Dixons shops.
BEHIND THE DEAL
CITIGROUP | JAN SKARBEC
1 Citi’s head of UK investment banking Jan Skarbec has a long track history of M&A and equity deals and has his hands full of late, working on Saga’s IPO as well as acting as Dixons’ lead adviser.
2 In recent years, Skarbek has completed transactions for a host of names, including Balfour Beatty, BMG, Britvic, Debenhams, Hammerson, Holidaybreak, Lonmin and Travis Perkins. A longstanding adviser to William, Skarbec was involved in its takeover of Sportingbet last year.
3 Skarbek, who holds a double first in Chemistry from University College, Oxford, has more than 20 years of investment banking experience, having joined Schroders Investment Banking in 1993 which was acquired by Citi in 2000.
Deutsche Bank acted as the lead financial adviser and corporate broker to Carphone Warehouse, with
head of UK Investment banking and head of consumer Scott Bell, M&A managing director James Arculus and directors Matt Hall and Chris Raff all working on the deal. UBS also acted as financial advisers and corporate brokers to Carphone Warehouse. The mobile phone giant’s legal team was made up of Freshfields Bruckhaus Deringer and Osborne Clarke.
Citigroup was lead financial adviser for Dixons, with Ben Storey, head of UK investment banking and broking working alongside Skarbec. Barclays were also financial advisers and corporate brokers to Dixons. Linklaters is was the retailer’s legal adviser, with a team led by London corporate partner Aedamar Comiskey.
CARPHONE CHAIRMAN: SIR CHARLES DUNSTONE
■ Raised in Saffron Walden, in Essex, Sir Charles Dunstone went to Uppingham, a private boarding school in Rutland, before skipping university and landing a job as a sales executive at NEC.
■ In 1989, he co-founded Carphone Warehouse with schoolfriend David Ross from a rented flat in west London having saved £6,000 to launch his own business.
■ The company floated in July 2000 and was valued at approximately £1.7bn.
■ Dunstone moved from being chief executive to chairman of the Carphone Warehouse Group in 2010. He was appointed chairman of TalkTalk Telecom the same year after it was spun off into a spearate company.
■ Dunstone was knighted for services to the mobile communications industry and to charity in 2012.
■ After discovering burger chain Five Guys on a trip to America, Dunstone invested in the chain and brought it to the UK – its first store launching in London.
■ An avid yachtsman, Dunstone owns several boats and takes part in sailing regattas across the globe.
DIXONS’ CHIEF EXECUTIVE: SEBASTIAN JAMES
■ The son of Lord Northbourne, a land owner and hereditary peer from Kent, James went from Eton to Oxford University and like David Cameron was part of the famous Bullingdon Club.
■ He started his career at the Boston Consulting Group having completed an MBA at INSEAD in France in 1991.
■ In 2010, Schools Secretary Michael Gove appointed James to lead a review of state school spending.
■ After a brief stint with Mothercare between 2002 and 2003 as strategy director, James co-founded Silverscreen, a DVD retailer, which was backed by private equity group Apax.
■ After Silverscreen collapsed in 2006, James moved to Synergy Insurance Services and took up the post as chief executive.
■ James joined Dixons Retail, then known as DSG International, in April 2008 and held various roles before being appointed to the board and becoming group operations Director.
■ He became its chief executive in 2012 after John Browett left to join Apple.