Best Buy Europe Joint Venture Comes To An End
The Best Buy Europe experiment has reached an unsuccessful conclusion as the company is pulling the plug.
Apparently Europe was not the best buy.
The electronic retailer is selling its 50 percent stake in Best Buy Europe and selling that position back to its joint venture partner, Carphone Warehouse Group, at a loss. Best Buy originally paid $2.15 billion to partner with Carphone Warehouse in 2008. It is now cashing out for $775 million.
The expectations for this venture were never realized: “Best Buy and Carphone Warehouse, the biggest independent mobile-phone seller in Europe, initially planned to build American-style big box electronics stores in Europe. In addition, Best Buy tapped Carphone Warehouse to help it build a chain of mobile-phone stores in the U.S., and the two agreed to share revenue from the stores. But Best Buy aborted its plans for big box Europe stores in 2011 and began undoing the partnership. It closed its initial stores in the U.K. and agreed to pay Carphone Warehouse $1.3 billion for its interest in the U.S. phone chain, Best Buy Mobile.”
Best Buy strategy was deemed ill-timed by financial analysts in part because of European’s ongoing economic woes. “While Best Buy was able to use Carphone’s phone expertise to boost its U.S. mobile business, the plans for a chain of European megastores fell apart because of weak consumer spending, low brand recognition and competition from local chains.”
The Board of Directors of both companies have approved this apparently amicable financial divorce, and it now awaits approval of Carphone Warehouse stockholders which presumably will be a formality. In commenting on Best Buy’s exit from Europe, CEO Hubert Joly said that “This transaction allows us to 1) simplify our business; 2) substantially improve our Return on Invested Capital … and 3) strengthen our balance sheet.”
It is not all rosy for Best Buy here at home. The struggling company has encountered substantial cash flow issues in the US and has begun closing or scaling back its big-box stores in favor of smaller outlets with a lesser inventory.
Do you still shop for electronics at Best Buy?
