* Companies see merger benefits worth 80 mln stg
* Dixons CEO Seb James to be CEO of combined company
* Dixons expects FY profit of 150-160 mln stg
(Adds quotes, details)
By James Davey and Neil Maidment
LONDON, May 15 Britain's Carphone Warehouse
and Dixons Retail have agreed a 3.8 billion
pound ($6.4 billion) merger to make the most of an increasing
convergence of smartphones and consumer electronics in people's
Combining Carphone, Europe's biggest independent mobile
phone retailer, and Dixons, Europe's No. 2 electricals retailer,
would create a group with turnover of about 12 billion pounds,
2,900 stores and 45,000 staff, the companies said on Thursday.
"This is a merger that is ahead of the curve, not behind the
curve, and is thinking about how the world is changing for
customers," Carphone Chief Executive Andrew Harrison told
More consumers are connecting their smartphones to household
devices such as music players and televisions or home appliances
like ovens, heating systems and even washing machines.
The combined group will be able to provide the technology
products, as well as the content and connections they need, and
services such as installation, insurance and trouble-shooting.
The all-share merger will address Dixons' lack of exposure
to lucrative mobile and smartphone retailing. Carphone faces
growing pressure from mobile phone networks choosing direct
channels to consumers.
"Right now there are four devices per UK household which are
connected. In the next two years that will become 20, and in the
next five years, globally, 75 billion connected devices will be
sold," said Dixons Chief Executive Sebastian James.
Carphone and Dixons announced merger talks in February but
Harrison said he and James had discussed the prospect for four
years. "We could probably write the strategies of the business
over each other and they would match," Harrison said.
The structure they came up with is an equal split of
ownership in the new company, named Dixons Carphone, between
existing Dixons and Carphone shareholders.
Dixons shareholders would receive 0.155 of a new Dixons
Carphone Plc share in exchange for each Dixons share. Based on
Wednesday's closing prices, Carphone had a market value of 1.90
billion pounds and Dixons 1.87 billion pounds, and the combined
group is likely to enter Britain's FTSE 100 index.
Shares in Dixons were down 6.4 percent, while Carphone's
were down 4.4 percent at 1252 GMT. Shares in both companies have
gained since they announced the tie-up talks.
Cantor Fitzgerald analyst Freddie George said the merger
looked more compelling for Dixons.
"It is unlikely to be interested in Carphone's European
operations, which include Virgin Mobile in France," he said.
COMPANIES UPBEAT ON ANTI-TRUST CLEARANCE
The two firms said they would be able to achieve synergies
and cost savings of at least 80 million pounds on a recurring
basis, expected to be delivered in full in the 2017-18 year,
including measures such as rationalising of infrastructure.
While some staff roles would no longer be needed, the two
firms said the merger would lead to an overall increase in jobs.
They plan to install Carphone "shop-in-shops" inside Dixons'
Curry's stores, as well as some in Nordic countries, though
there has been no decision yet on whether to close some Carphone
Charles Dunstone, Carphone's co-founder, chairman and 23.5
percent shareholder, will chair the combined group.
Dixons, home to the Currys and PC World chains in Britain,
Elkjop in Nordic countries and Kotsovolos in Greece, will take
the top two executive jobs, with CEO James and Chief Financial
Officer Humphrey Singer adopting the same roles.
Harrison will become deputy CEO, while Roger Taylor, deputy
chairman of Carphone, and John Allan, the Dixons Retail
chairman, will be deputy chairmen.
The proposed merger requires the approval of Dixons and
Carphone shareholders as well as anti-trust clearance, which
James said they expected to get.
Cantor Fitzgerald analyst George said there was a small
chance the merger could be referred to the UK's Monopolies
Commission, because of an overlap in product segments and the
service dominance of the two businesses.
Deutsche Bank and UBS are advising Carphone Warehouse on the
deal while Citigroup and Barclays are advising Dixons Retail.
Strong demand for smartphones and tablets in Britain has
driven Carphone's 33 percent share price rise over the last
year, offsetting weakness in its French business, and the firm
has high hopes for 4G superfast mobile broadband products.
Shares in Dixons, which trails Germany's Media-Saturn in
Europe by annual sales, have risen 38 percent in a
year. The company has focused increasingly on markets where it
has a leading "multi-channel" position with a combined stores
and internet business, and recently offloaded its loss-making
e-commerce unit PIXmania and operations in Turkey and Italy.
Dixons also released a trading statement on Thursday,
forecasting that its full-year underlying profit before tax
would be at the top end of market expectations of 150 million
pounds to 160 million pounds.
($1 = 0.5960 British Pounds)
(Editing by Kate Holton and Tom Pfeiffer)