Carphone Warehouse, Dixons Retail in "merger of equals" talks

British mobile phone retailer Carphone Warehouse and specialist electrical products retailer Dixons Retail are close to announcing a merger of equals, creating an entity valued at around £3.7 billion ($6.2 billion).

Responding to media speculation on a potential merger, both companies had in February said in a statement, "'These discussions are at a very preliminary stage and there can be no certainty that a transaction will be forthcoming."  (See: UK's Carphone Warehouse and Dixons Retail in £3.5-bn merger talks)

As required under the UK takeover panel law, both retailers were required to announce a firm intention to make an offer by 24 March 2014, but both companies sought an extension until 19 May in order to trash out finer details of the deal.

According to Sky News, the merger is expected to be structured on an equal basis and the new entity will be named the Dixons Carphone Group with about 2,900 stores.

Founded in 1989 by its current chairman Sir Charles Dunstone when mobile phones were bulky and called car phones, Carphone Warehouse is Europe's largest independent mobile phone retailer.

The London-based retail chain has 2,000 stores across seven European countries and a market value of £1.9 billion.

It entered the broadband business in 2006 by acquiring the UK business of AOL for £370 million, and paid £1.1 billion in 2008 to buy America's largest electrical retailer Best Buy. This deal allowed Carphone to split its telecom and retail businesses. Best Buy Europe now consists of its core European retail business, CPW Europe.

A year later, Carphone acquired the UK assets of Italian telecoms group Tiscali for £236 million and became UK's second largest broadband provider after BT. The business was later rebranded under the TalkTalk brand.

Carphone also has a mobile virtual network joint venture in France with Virgin Mobile.

Virgin Mobile France is the largest MVNO in France with 1.7 million subscribers. Using the networks of Orange, SFR and Bouygues, operates mobile communication services and is the alternative brand to traditional operators in the French market.

Carphone posted net income of £4.2 million last year on revenues of £10.7 million.

Dixons Retail is Europe's largest specialist electrical retailer, operating Currys, Currys Digital, PC World, Dixons Travel and Electro World stores along with other brands in 900 stores in 12 countries across Europe.

The Hempstead-based company sells consumer electronics products, audio-video equipment, PCs, small and large domestic appliances, photographic equipment, communication products and related financial and after sales services.

It also sells electrical products, spares, repairs, mobile services, online digital photo processing, pre-recorded media and childcare equipment.

The London Stock Exchange-listed retailer has a market cap of £1.8 billion, and posted net loss of £158 million in 2013 on sales of £8.4 billion.