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Mobile devices retailer, Carphone Warehouse, and electrical goods retailer, Dixons, announced their plans for an all-share merger today (15th May).

The combined market capitalisation of both companies currently comes in at around £3.7bn.

This announcement follows a statement released back in February, which confirmed that both companies were in the early stages of mergers discussions.


Published 15/05/2014

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Mobile devices retailer, Carphone Warehouse, and electrical goods retailer, Dixons (operator of the Currys and PC World brands), announced plans for an all-share merger today (15th May).

Under the terms of the deal, each of Carphone’s and Dixons’ shareholders will hold 50% of the combined entity (to be called Dixons Carphone).

The rationale behind the deal is that the combined group, as a larger UK retailer with a broader offering, should be able to capture the opportunities brought on by the convergence of the consumer electronics and mobile phone retail landscape.

Meanwhile, by way of synergies, the companies reckon the new entity will be able to achieve integrated mobile and retailing and procurement synergies.

That’s in addition to cost synergies to the tune of at least £80m on a recurring basis – expected to be delivered in full in fiscal 2017/18.

By the way, expectations are that the new combined company, Dixons Carphone, will likely make it onto the FTSE 100.

The dividend front: in a move that isn’t unusual, neither Dixons nor Carphone will pay dividend prior to completion of the merger (other than Carphone’s final dividend of 4p for its year-ended 29th March). On completion, however, the new entity will adopt Carphone’s current dividend policy.

The market seemed convinced by the deal previously - the share price of both companies went up following confirmation of merger talks in February - and that likely remains the case.
It is indeed true that the combination would create a larger entity, with a broader - and complementary - range of products.

That’s not to say that success will come easily: competition is heavy, notably from the online world (think Amazon); and that’s aside from large retailers with an eye on the sector.

Still, the combined group should stand a better chance of fighting off the competition than they would on their own - Dixons, in particular, was far more vulnerable standalone.