Recommended all-share merger
FOR IMMEDIATE RELEASE
15 May 2014
RECOMMENDED ALL-SHARE MERGER OF CARPHONE WAREHOUSE GROUP PLC
AND DIXONS RETAIL PLC
Summary
· The Boards of Carphone Warehouse Group plc and Dixons Retail plc are pleased to announce that they have reached agreement on the terms of a recommended all-share merger of Carphone and Dixons, which is to be implemented by way of a scheme of arrangement of Dixons.
· The Merger will result in each of Dixons' and Carphone's Shareholders holding exactly 50 per cent. of Dixons Carphone on a fully diluted basis taking into account existing share options and award schemes for both companies. 1 Under the terms of the Merger, Dixons Shareholders will receive:
0.155 of a New Dixons Carphone Share in exchange for each Dixons Share
· The merged entity, to be called "Dixons Carphone plc", will create a leader in European consumer electricals, mobiles, connectivity and related services.
· The Boards of Carphone and Dixons believe that the Merger will deliver significant value to shareholders through a combination of enhanced commercial opportunities and operating synergies.
· The Carphone Directors and Dixons Directors, having reviewed and analysed the potential synergies of the Merger, based on their experience of operating in the consumer electrical and mobile retail sectors, and taking into account the factors they can influence, believe that the Combined Group will be able to achieve integrated mobile retailing and procurement synergies, together with cost savings, of at least £80 million on a recurring basis, which are expected to be delivered in full in the financial year 2017/18. The Boards of Carphone and Dixons expect Dixons Carphone to deliver these synergies progressively, achieving almost half of them in financial year 2015/16.[2]
· The Combined Group will also have the opportunity to achieve significant additional value from growth opportunities arising from the Merger.
· As from Completion, Sir Charles Dunstone, Chairman of Carphone, will become the Chairman of Dixons Carphone. Roger Taylor, Deputy Chairman of Carphone, and John Allan, Chairman of Dixons will become Co-Deputy Chairmen and John Allan will also become Senior Independent Director; Sebastian James, CEO of Dixons, will become CEO; Andrew Harrison, CEO of Carphone, will become Deputy CEO; Humphrey Singer, CFO of Dixons, will become CFO; Katie Bickerstaffe, CEO of UK & Ireland Dixons, and Graham Stapleton, CEO of UK & Ireland Carphone, will join the Dixons Carphone Board as Executive Directors and retain their current responsibilities. In addition, the Dixons Carphone Board will comprise six other Non-Executive Directors. John Gildersleeve, Baroness Morgan of Huyton and Gerry Murphy will be the Non-Executive Directors appointed from Carphone. Tim How, Jock Lennox and Andrea Gisle Joosen will be the Non-Executive Directors appointed from Dixons.
· Each of the Proposed Directors of the Dixons Carphone Board has given a binding undertaking not to dispose of any of his or her beneficial holdings in shares of Dixons Carphone (or any interest therein), which he or she holds on Admission or subsequently acquires during the lock-in period. All of the Proposed Directors have given this undertaking for a period of 24 months following Completion with the exception of Katie Bickerstaffe and Graham Stapleton who have given this undertaking for a period of 12 months, in line with the undertakings expected to be received from other senior executives.
· Carphone and Dixons are both experienced operators with significant knowledge and expertise. The integration of the two businesses will be managed by a dedicated integration team, bringing together the best relevant capabilities of both businesses, with the aim of facilitating a smooth integration.
· Carphone and Dixons have put in place appropriate banking facilities to ensure that Dixons Carphone will have a strong financial profile following Completion, which will enable the Combined Group to retain flexibility whilst reviewing its optimal capital structure going forward.
· Dixons Carphone intends to adopt a dividend policy in line with Carphone's current dividend policy of 3.0x dividend cover based on Headline Earnings. The exchange ratio of the Merger has been determined on the basis that no dividend will be payable by either of Carphone or Dixons prior to Completion, other than an ordinary course Carphone final dividend of 4 pence per Carphone Share in respect of the financial year to 29 March 2014.
· The Merger will be conditional on, amongst other things, the approval of Carphone Shareholders and Dixons Shareholders, the sanction of the Scheme by the Court and relevant anti-trust clearances being received.
· Carphone and Dixons have received irrevocable undertakings to vote in favour of the Merger from those of the Carphone Directors, their families and related trusts, and Dixons Directors, their families and related trusts, who hold or are beneficially entitled to Carphone Shares and/or Dixons Shares, representing in aggregate 26.7 per cent. of Carphone's ordinary share capital and 0.06 per cent. of Dixons' ordinary share capital respectively in issue on 14 May 2014 (being the latest practicable date prior to this Announcement).