DCSIMG

Phones 4u frozen out of merger plan

Picture: TSPL

Picture: TSPL

  • by MARTIN FLANAGAN
 

THE attempt by Phones 4u to gatecrash the £4 billion merger talks between Dixons and Carphone Warehouse is likely to fail despite last week’s lengthy extension to the ­deadline.

It is understood the extra eight weeks from 24 March to 19 May for talks to continue had nothing to do with Phones 4u’s contact with Dixons soon after the merger discussions were announced in late Feb­ruary.

Last Monday, Dixons and Carphone Warehouse said in an update for the market: “Since the announcement of 24 February was made when discussions were at a very preliminary stage, both parties have agreed that they require more time to evaluate a potential merger of the two businesses.”

Telecoms analysts believe this is the more credible explanation for both retailers seeking an extension of the deadline from the City’s Takeover Panel, with most now highly sceptical a rival takeover of Phones 4u by Dixons will emerge.

Sebastian James, chief executive of Dixons, which owns PC World and Currys, is believed to have told BC Partners, the private equity owner of Phones 4u, that he is uninterested in an alternative to what the City believes would be a nil premium merger with Carphone.

However, it is understood James has been prepared to talk to BC Partners about the existing collaboration whereby Phones 4u operates about 160 store-in-store operations at PC World and Currys.

That collaboration currently runs until May 2015, and is seen by some analysts as under threat if Dixons and Sir Charles Dunstone’s Carphone tie the knot.

It is believed that a significant hurdle facing Phones 4u is that it is smaller and more UK-centric than Carphone.

By contrast, Dunstone’s company already has much greater telecoms scale and overlapping operations with Dixons in Scandinavia and the Republic of Ireland.

Analysts point out that Carphone’s share price of 331p is comfortably higher than the 300p level it was trading at when merger talks were announced on 24 February. Dixons is trading at 48.5p compared with 52p at the time of the announcement.

Shares in both companies have periodically dipped as the stories about Phones 4u’s alternative industry con­solidation plan have ebbed and flowed, but one analyst said: “I think what the share prices are telling us is that Phones 4u’s intervention is largely seen as historical now.

“The market doesn’t believe the greater strategy is there in any tie-up between it and ­Dixons. Carphone is seen as having some of the best systems in the world for connecting people to phones and iPads. It is a worldwide operation and I think Dixons want access to that.

“It would also be surprising that Dixons put out a joint statement with Carphone last week for the deadline extension without reference to anything else at all if other relevant conversations with third parties on a takeover were happening.”

 

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