Dixons Carphone deal structured as a 'merger of equals'

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By Joel Hills: Business Editor

Currys, PC World and Carphone Warehouse are getting together in a merger that's being presented as something of a digital revolution, but if it does go ahead shoppers will barely notice anything has changed.

No stores will close. No jobs will be lost, in fact Dixons Carphone would be recruiting, albeit modestly.

The "revolution" here is the idea that these two companies have glimpsed the future and decided that the smartphone is rapidly becoming the remote control by which we live our lives.

ITV News Business Editor Joel Hills takes a look at the merger.
ITV News Business Editor Joel Hills takes a look at the merger. Credit: ITV News

As Sebastian James, the current chief executive of Dixons, told me earlier, we can already adjust the central heating, record television and fire-up the stereo using a mobile and this is just the beginning.

I think this is a sort of magic time.

We are, for the first time, becoming genuinely connected in our homes ... we'll soon be able to use our phones to open the car and even find out what's in our fridge.

– Sebastian James, Dixons chief executive

So bolt together a retailer that sells mobile phones and a retailer that sells the electronic devices they connect with and ka-ching!

Maybe. Although at some point shoppers' appetites for new technology and their willingness to pay for it may end up disappointing. After all, smartphone sales have soared but four in 10 adults in Britain still don't own one.

But there's a more solid, if duller, logic to this tie-up which is that greater size brings with it great savings.

A combined Dixons Carphone would have sales of around £12 billion a year and therefore much more buying power than either company has separately.

Dixons says £80 million a year is there to be saved, in the age of internet retailing that's breathing space at a time when prices are being squeezed.

A tablet showing the cameraman filming the interview.
But there's a more solid, if duller, logic to this tie-up which is that greater size brings with it great savings. Credit: ITV News

The competition between high street retailers, supermarkets and the online mob is so ferocious that it's turned selling electrical goods into a high volume, low profit margin business - a few weeks back even Tesco decided it was no longer worth its while stocking plasma televisions.

This has been structured as "merger of equals" but Dixons' shareholders will surely be the more enthusiastic. Not so long ago their company looked like it was going the way of Comet.

The future may not come to pass in the way that's been set out today, but at least it sounds plausible.