Best Buy acquires UK partner for $1.3bn
New York, November 7, 2011
US electronics retailer Best Buy Co is buying its British partner out of a fast-growing US mobile phone joint venture for $1.3 billion and scrapping plans for a chain of European megastores, it said on Monday.
The moves are latest sign Best Buy is scaling back its overseas ambitions to focus on its main US business, which faces stiff competition from discounters and online retailers. Earlier this year, the US group dropped plans for Best Buy-branded stores in China and Turkey.
The decisions also underscore the gloomy outlook for European retailers as consumers there grapple with rising prices, subdued wages growth and government austerity.
Best Buy said it would buy out Carphone Warehouse Group Plc from a profit share of their Best Buy Mobile venture in the United States and Canada, which has been benefiting from soaring demand for smartphones like Apple's iPhone.
"For Best Buy to be able to no longer have to share 50 percent of the profits of a high-margin, fast-growing business with Carphone Warehouse, from my perspective, is a real positive," said BB&T Capital Markets analyst Anthony Chukumba.
"(But) it is not a game-changer. Best Buy still has the same challenges they did 24 hours ago -- fairly weak product cycle particularly in flat-panel TVs, increasing competition from Amazon, probably too much retail square footage."
The deal, along with a new venture aimed at replicating Best Buy Mobile's success in emerging markets, helped to move attention away from the closure of the two firms' loss-making megastores business in Britain, as well as a larger-than-expected drop in Carphone's first-half earnings.
At 1350 GMT, Carphone shares were up 1 percent at 348.25 pence, outperforming a 1.1 percent fall in the STOXX Europe 600 European retail index.-Reuters