LONDON (Reuters) ? U.S. electricals retailer Best Buy Co Inc will pay $1.3 billion to buy its British partner out of a fast-growing U.S. mobile phone venture, while abandoning plans for a chain of European megastores, it said on Monday
The moves are the latest sign Best Buy is scaling back its overseas ambitions in order to focus on its main U.S. business, which faces stiff competition from discounters and online retailers. Earlier this year, the U.S. group dropped plans for Best Buy-branded stores in China and Turkey.
The decisions also underscore the gloomy outlook for European retailers as consumers there grapple with rising prices, subdued wages growth and government austerity.
Best Buy said it would buy out Carphone Warehouse Group Plc from a profit share agreement of their Best Buy Mobile venture in the United States, which has been benefiting from soaring demand for smartphones like Apple's iPhone.
Barclays analysts said Carphone was getting a good price, with the 838 million pound ($1.3 billion) deal worth more than the entire equity valuation of the British group when it was demerged from telecoms arm TalkTalk last year.
At 0850 GMT (3:50 a.m. ET), Carphone shares were up 2.4 percent at 353.25 pence, outperforming a 1.7 percent fall on the STOXX Europe 600 European retail index.
Carphone said it would return proceeds from the sale of its profit share in Best Buy Mobile to shareholders, signaling another windfall for founder Charles Dunstone.
Dunstone, who owns about 29 percent of Carphone Warehouse according to Reuters data, has been praised by investors for striking his initial deal with Best Buy shortly before a plunge in equity market valuations.
UK OUT, EMERGING MARKETS IN
Best Buy bought 50 percent of Carphone's retail operations in 2008 for about $2.1 billion to tap the British firm's expertise in mobile phones and to act as a springboard for expansion across Europe.
While the U.S. mobile phone business has exceeded expectations, the plans for a chain of European megastores have been hit by weak consumer spending, low brand recognition and competition from incumbent players such as Dixons.
Best Buy and Carphone said they would close their 11 Best Buy-branded stores in Britain and expected to redeploy most of the 1,000 or so affected staff.
Only three years ago, when the two firms' announced plans for electrical goods megastores, they promised a chain of up to 100 outlets in Britain that would then sweep across Europe.
Best Buy and Carphone said they would focus on Carphone's existing smaller format stores in Europe -- their Best Buy Europe business -- and also announced a venture aimed at replicating Best Buy Mobile's success in emerging markets.
The two firms also formalized their relationship over Best Buy Europe, saying Best Buy would have the right to buy Carphone's 50 percent stake from March 2015 and that, if it did not do so, Carphone would have the right to buy Best Buy's stake at a 10 percent discount to fair market value.
Carphone reported a slightly bigger-than-expected drop in first-half earnings per share to 1.2 pence from 5.5 pence the year before, due in part to 46.7 million pounds of losses at the British megastores business, as well as a trend toward 24-month mobile contracts in Britain which has delayed renewals.
(Editing by David Holmes and Jon Loades-Carter)
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