Best Buy enters Europe with Carphone retail venture

By Kate Holton

LONDON (Reuters) - U.S.-based Best Buy Co Inc (BBY.N: Quote, Profile, Research, Stock Buzz), the world's biggest electronics retailer, is to pay $2.1 billion for half of Britain's Carphone Warehouse Group Plc's (CPW.L: Quote, Profile, Research, Stock Buzz) retail business to take on the European consumer electricals market.

The deal creates a joint venture that will compete with DSG International Plc (DSGI.L: Quote, Profile, Research, Stock Buzz), formerly called Dixons, and Kesa (KESA.L: Quote, Profile, Research, Stock Buzz) which owns the French group Darty.

Carphone, Europe's biggest independent mobile phone retailer, and Best Buy, estimate the size of the European market for consumer electronics to be around 89 billion pounds ($174 billion).

The pair said the 50-50 owned company would target a growing appetite for consumer electronics, but analysts said the pair are entering a tough market where incumbents are struggling.

"European consumers are facing some of the same pressures that U.S. consumers are," Carphone Chief Executive Charles Dunstone said during a conference call. But even so, there were now opportunities to obtain high-quality retail space.

"The current environment I certainly hope isn't going to last forever," Dunstone said.

Carphone's 2,400 existing stores will continue to operate under the Carphone Warehouse and Phone House brands in its nine European markets, and from 2009 the new company will roll out larger stores under the Best Buy name.

The deal "provides us with the other giant consumer electronics marketplace in the world where Best Buy currently has very little offering," Best Buy Chief Executive Brad Anderson said.