Deal lets Best Buy enter Europe

Retailer strikes $2b partnership

Carphone Warehouse chief Charles Dunstone will serve on the board of the company created through a joint venture with Best Buy. (REUTERS)

LONDON - Best Buy Co., the largest US electronics retailer, will open its first stores in Europe by investing $2.15 billion in a joint venture with Carphone Warehouse Group PLC.

The 50-50 venture will include Carphone Warehouse's 2,400 retail stores in nine European countries, the companies said yesterday. The assets will also include London-based Carphone Warehouse's share of an existing venture with Best Buy.

Best Buy will open stores under its brand name across Europe, beginning next year in the United Kingdom, where the electronics retail market is dominated by DSG International PLC's Dixons, Currys, and PC World stores. Richfield, Minn.-based Best Buy has almost four times the revenue of its closest competitor, Circuit City Stores Inc.

"Best Buy has a much better chance of being successful in Europe by partnering with Carphone than they would opening stores there all by themselves," Anthony Chukumba, a New York-based analyst with FTN Midwest Securities Inc., said. "Having a management team that already has experience and connections in Europe is a huge, huge benefit."

Best Buy spokeswoman Kelly Groehler said the company isn't naming the countries in which it will open stores. Carphone has stores in 10 European countries, including Germany, France, and Spain.

Carphone Warehouse, Europe's largest handset retailer, will use the proceeds to cut debt, invest in broadband expansion, and make acquisitions. The deal will leave the ownership structure of Carphone Warehouse intact, including the minority stake held by founder and chief executive Charles Dunstone.

Best Buy fell $1.40, or 3.2 percent, to $42.05 yesterday. The shares dropped 17 percent this year through Wednesday.

Carphone Warehouse declined 3.4 percent to $5.66 in London trading.

Current Carphone Warehouse shops will keep the Carphone Warehouse name, the companies said. The new, larger stores that are opened in Europe will be branded Best Buy.

The first store will open in 2009, the companies said.

Best Buy is venturing into Europe two years after Wal-Mart Stores Inc., the world's biggest retailer, abandoned its attempt to gain a foothold with stores in Germany. The Bentonville, Ark., chain sold its 85 German stores in 2006 because of competition from discount retailers Aldi Group and Lidl.

Bob Willett, the chief executive of Best Buy International, will be chairman of the new venture, and Carphone Warehouse chief financial officer Roger Taylor will be chief executive of the venture while retaining his current role.

In the United States, Best Buy plans to set up a new mobile-phone department, with a wider selection of devices and wireless plans, at all of its stores in the next 18 months. About 180 of its 1,300 stores have the expanded section now.