Carphone Warehouse and Best Buy dissolve joint venture

The joint venture between Carphone Warehouse and Best Buy is finally coming to an end.

The five-year deal, which saw the two companies jointly operating stores in eight European countries, and Carphone Warehouse helping with the launch of Best Buy Mobile in the US, finishes with an agreement between the two for the UK company to buy out its partner's 50% stake for a total of $775m.

After certain contractual obligations are taken into account, the buy-back will cost Carphone Warehouse around £471m, with company chief executive Roger Taylor saying yesterday that ' Today we are announcing the end of our five year joint venture with Best Buy and with this the return of CPW Europe to its original shareholders.

'Carphone Warehouse and Best Buy have enjoyed a great relationship over the last five years ensuring that we shared and enjoyed many aspects of each other's business attributes.

'However, following the sale of our US interest last year, we have become increasingly responsible for the day-to-day operations of CPW Europe whilst conversely Best Buy have become more focused on their wholly-owned businesses.

'As a result, both parties have agreed that this is a good time for us to bring the joint venture to an end, whilst ensuring that our relationship remains in place by way of our global buying alliance.'

The two had already reduced their links on the Best Buy Mobile joint venture, Best Buy buying out Carphone Warehouse's share of the profits from that operation in 2011, and in return agreeing to pay the UK-based company a £5m/year consultancy fee for five years.

The most obvious sign of the joint venture was the arrival of the huge blue Best Buy stores, such as the one above, on UK retail parks: the first was opened in Lakeside, Essex on April 30th, 2010, a year later than originally scheduled, the company having pans to roll out 200 outlets across the UK, and the intention of locating one in a prime central London location.

Andy Clough went behind the scenes at Best Buy for

as the first store prepared to open, and reported on the impressive line-up of brands the store was stocking, and the purpose-built demonstration facilities on offer.

More stores followed the Essex opening, and in total 11 stores were opened as part of a scaled back plan for 20 'big box' outlets.

However, by the end of the 2010-11 financial year the joint venture was reporting losses of £62.2m – around £10m for each store trading in that period. With ten stores then open, and a further one soon to be launched in Enfield, plans to open a total of 80 stores were under review, and there was talk of cutting back those 11 stores and looking at smaller shop formats.

In November 2011 the closure of all 11 'big box' Best Buy stores in the UK was announced.

Best Buy president and CEO Hubert Joly says of the deal announced yesterday that 'This transaction allows us to simplify our business; substantially improve our return on invested capital, one of the five pillars of our Renew Blue transformation; and strengthen our balance sheet.

'Each international market is different and the sale of our European operations should not suggest any similar action in our other international businesses.'

Best Buy currently has over 1400 outlets, and employs more than 165,000 people worldwide. In its latest financial year ending in February 2013, it had revenues of just under $50bn.

Written by Andrew Everard

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Andrew has written about audio and video products for the past 20+ years, and been a consumer journalist for more than 30 years, starting his career on camera magazines. Andrew has contributed to titles including What Hi-Fi?, GramophoneJazzwise and Hi-Fi CriticHi-Fi News & Record Review and Hi-Fi Choice. I’ve also written for a number of non-specialist and overseas magazines.