Best Buy Co. and The Carphone Warehouse Group PLC are teaming up to form a new European consumer electronics-based business venture.
 
The Carphone Warehouse, Europe’s largest independent mobile phone retailer, will contribute its retail business—including its 2,400-plus stores, mobile airtime reselling operations, and insurance operations—to the venture in exchange for a 50 percent stake in the new company and a cash consideration of $2.1 billion.
 
The deal is expected to provide a platform for The Carphone Warehouse to expand its business model and for Best Buy to launch consumer electronics stores in Europe.
 
“We’ve been successful with our business model and aspire to apply that model to one of the largest markets in the world,” says Bob Willett, CEO and chief information officer of Best Buy International. “Yet we must do so carefully and with humility. We have seen great companies fail because they thought they could simply export their current business model to new geographies.”
 
Consumer electronics has been the fastest-growing segment of European retail market over the past five years and represents an estimated $175 billion. The partnering companies expect future growth in consumer electronics to be led by the convergence in entertainment, computing, and communications—and they say wireless information provision, mobility, and broadband services will be key to success in their new venture.
 
Specifically, the new company’s plans are:
 
-       To continue to grow The Carphone Warehouse’s existing retail business through physical expansion in its existing European markets, the evolution toward mobile and fixed-line connectivity, growth in private-label products, and benefits from joint buying, sourcing, and merchandising.

-       To build a significant market share in consumer electronics retailing in Europe through the roll-out of Best Buy stores, services, and Web sites in selected markets beginning in 2009.

-       To bring The Carphone Warehouse’s expertise in sourcing mobility products, bundling services, and operating smaller stores to Best Buy’s North American operations.
 
The deal is expected to close during Best Buy’s fiscal second quarter, which ends August 30.
 
Best Buy is a Minnesota-based world-leading consumer electronics retailer with fiscal year 2008 revenues of $40 billion, operating income of $2.2 billion, 150,000 employees, and 1,314 stores with more than 48 million square feet of sales space in the United States, Canada, and China.