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UK Electronics Giants Announce Retail Merger

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Two of the UK's largest consumer electronics and phone retailers have agreed to a merger. Talks between Dixons and Carphone Warehouse have been under way for some months, but the merger has only now been agreed upon.

It is a merger of equals, with shareholders of each company ending up owning exactly half of the merged entity, and the merged company expects to drive cost savings of around £80 million a year from 2017 onwards.

Around half the cost savings will come from cost savings at the back-end of the retail operation, while the rest will come from cost savings in the retail front end, closing overlapping retail stores and the like.

Unusually for a merger, the cost savings do not include net reductions in staff. The company actually expects to increase its overall headcount slightly by the end of 2016 -- with increases in retail staff more than offsetting the losses at the back-end of the company.

The current CEO of Dixons, Sebastian James will remain as CEO of the larger company, while Sir Charles Dunstone, Chairman of Carphone Warehouse, will become the Chairman of the merged company -- to be known as Dixons Carphone.

Although the merger is subject to shareholders approvals, the company has already secured agreements from family trusts linked to the founders who own 26.7 percent of the companies.

Dixons operates more than 500 Currys and PC World branded retail stores in the UK and Ireland, while Carphone Warehouse operates more than 2,000 stores across Europe.

Dixons currently has a franchise agreement with Phones4U who sell their products within the Dixons stores. It can be expected that the franchise agreement will be cancelled, or at least not renewed with the contract expires.

The merger values the companies at around £3.6 billion (USD6 billion).

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Tags: carphone warehouse  dixons  UK