UK’s Carphone Warehouse and Dixons Retail in £3.5-bn merger talks

British mobile phone retailer Carphone Warehouse is in merger talks with specialist electrical products retailer Dixons Retail that could create an entity valued at at around £3.5 billion.

Responding to media speculation, both companies said in a statement, "The boards of Dixons and Carphone Warehouse note the recent speculation and confirm that the two companies are in preliminary discussions regarding a possible merger of Dixons and Carphone Warehouse."

''These discussions are at a very preliminary stage and there can be no certainty that a transaction will be forthcoming, they said.

As required under the UK takeover panel law, both retailers are required to announce a firm intention to make an offer not later than 24 March 2014.

Founded in 1989 by its current chairman Sir Charles Dunstone when mobile phones were bulky and called car phones, Carphone Warehouse is Europe's largest independent mobile phone retailer.

The London-based retail chain has 2,000 stores across seven European countries and a market value of £1.77 billion ($2.95 billion). Share price of Carphone rose today by 8.60 per cent and was trading at £314.60.

It entered the broadband business in 2006 by acquiring the UK business of AOL for £370 million, and paid £1.1 billion in 2008 to buy America's largest electrical retailer Best Buy. This deal allowed Carphone to split its telecom and retail businesses. Best Buy Europe now consists of its core European retail business, CPW Europe.

A year later, Carphone acquired the UK assets of Italian telecoms group Tiscali for £236 million and became UK's second largest broadband provider after BT. The business was later rebranded under the TalkTalk brand.

Carphone also has a mobile virtual network joint venture in France with Virgin Mobile.

Virgin Mobile France is the largest MVNO in France with 1.7 million subscribers. Using the networks of Orange, SFR and Bouygues, operates mobile communication services and is the alternative brand to traditional operators in the French market.

Carphone posted net income of £4.2 million last year on revenues of £10.7 million.

Dixons Retail is Europe's largest specialist electrical retailer, operating Currys, Currys Digital, PC World, Dixons Travel and Electro World stores along with other brands in 900 stores in 12 countries across Europe.

The Hempstead-based company sells consumer electronics products, audio-video equipment, PCs, small and large domestic appliances, photographic equipment, communication products and related financial and after sales services.

It also sells electrical products, spares, repairs, mobile services, online digital photo processing, pre-recorded media and childcare equipment.

The London Stock Exchange-listed retailer has a market cap of £1.9 billion and posted net loss of £158 million in 2013 on sales of £8.4 billion.