Resumed Best Buy takeover talks could prove windfall for Carphone Warehouse

Clause tucked into partnership deal could let Carphone get back other half of its biz at bargain price

Carphone Warehouse could be in for a handsome profit and undergo a major reshuffle if resumed takeover talks for its partner Best Buy are successful. The two share ownership of retailer CPW Europe, which in the UK operates under the Carphone Warehouse brand, as well as the emerging markets-focused business Global Connect. In the USA, Best Buy’s founder Richard Schulze has made an offer worth up to $8.84 billion to buy the company back and, though talks initially stalled, they’re now said to be back on track. Schulze resigned as chairman of Best Buy in May after it was found he “acted inappropriately” in a scandal surrounding its CEO Brian Dunn and his relationship with a female staffer.

Dunn also resigned. Since then Best Buy’s share price has dropped dramatically, plunging 11 per cent this week alone.

But Schulze still owns a fifth of the company and is now fighting to buy it back with the help of private equity.

According to reports out of the US yesterday [23rd August 2012], the only hurdle is the terms surrounding due diligence allowing Schulze and his equity partners to examine the books before committing.

Best Buy have offered a 60 day time limit for Schulze to show his hand, with a separate clause preventing him from mounting a hostile takeover within a year if the bid is unsuccessful.

Schulze has demanded more leeway though the fact the two sides are talking again is said to be significant.

For Carphone Warehouse, any takeover of Best Buy could prove a windfall – on the one hand allowing it to take hold of the European business at the same time selling its stake in Global Connect.

Charles Dunstone sold half of Carphone Warehouse Europe, which owns his stores in the UK and on the continent, to Best Buy for £1.1 billion in 2008.

The pair also have a profit-sharing agreement to create a chain of mobile phone stores in China and Mexico.

But if Schulze succeeds in his bid to buy out the company he founded, a clause in its deal with Carphone Warehouse would allow Dunstone to buy back his half of his business for just £440 million which, at current exchange rates, is around £660m less than Best Buy originally paid.

In short, a nice little earner…