Best Buy puts $2.1 billion into European cell phone retailer

MINNEAPOLIS – Best Buy, the largest U.S. consumer electronics chain, has moved into Europe with a $2.1 billion investment in the continent’s largest cell phone retailer, the companies announced today. Best Buy’s 50% stake in a joint venture with Carphone Warehouse Group will allow it to roll out its trademark big box stores in Europe, with the London-based company putting its 2,400 European stores into the new operation.

The companies said they have been speaking for four years, and have collaborated for two, developing Best Buy Mobile in the U.S., and bringing Best Buy’s Geek Squad, a 24-hour computer support task force, to Europe.

“We believe our combined expertise has potential to result in significant financial upside as we together attempt to transform retail in Europe through the Carphone Warehouse, Phone House and Best Buy brands,” said Brian Dunn, president and chief operating officer of Carphone Warehouse.

Brad Anderson, chief executive of Richfield-based Best Buy, said the companies share similar cultures and customer-related skills. He said the joint venture will allow Best Buy to grow.

Citing competition, executives declined to say how many Best Buy stores would open in Europe, or where, but did say the stores would come in a range of sizes.

The stores will also compete aggressively on prices, Anderson said.

“With the name Best Buy we have a commitment we have to live up to,” he said.

The joint venture also includes the Web and direct businesses of The Carphone Warehouse, its insurance operations, and its airtime reselling businesses.

The Carphone Warehouse Group will continue as sole owner of its fixed line telecommunications business in the United Kingdom, which includes TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture.

It said it would use proceeds from the deal to pay down debt, invest in broadband customer growth, infrastructure and other areas. Its current European retail management team initially will remain in place, the companies said.

In a research note, RBC Capital markets analyst Scot Ciccarelli said the deal offers Best Buy “an intelligent and low-risk strategy to enter the European market,” rather than starting from scratch.

He noted that Carphone Warehouse gets to keep its international business, get an injection of cash to pay down debt and invest in operations, and that it will benefit from Best Buy’s consumer electronics experience.