Bottom Line: A merger of egos could be difficult to seal
AS THE world’s telecoms bigwigs gathered in Barcelona for Mobile World Congress yesterday, something was afoot much closer to home.
Forced to reveal much earlier than planned that they were in “very preliminary” talks over a potential merger, Carphone Warehouse and Dixons quickly became the FTSE 250 darlings – climbing almost nine and seven per cent respectively.
It’s not the first time the two retailers have held talks, but it’s the first time they’ve approached the table as equals, making a successful deal much more likely the second time round. Last time a merger was discussed in mid-2011, Dixons shares were worth just over a fifth of today’s closing price (11.87p vs 50.3p) while Carphone’s were actually higher (386p vs 333p). The shift in value – partly due to Dixons benefiting from Comet’s demise – means the two firms have a remarkably similar market cap, hovering somewhere around the £1.8bn mark. And given the move towards one-stop shops for all things tech – the only way to try to compete with the likes of Amazon – a tie-up makes strategic sense, though savings may be few and far between.
So far, so good. But there’s still one major bump in the road ahead of the 24 March deadline. Behind both firms are two major personalities – Carphone chairman Sir Charles Dunstone and Dixons’ CEO Sebastian James. There seems to be a deal that they will keep their existing job titles under a mash-up of the companies; but these are two big dogs, and how the power is balanced could prove crucial for whether the deal works.