Dixons and Carphone Warehouse in merger talks

Dixons Retail, the owner of Currys and PC World, and mobile phone retailer Carphone Warehouse have said they are in talks over a possible merger.

The companies said the talks were at a very early stage and there could be no certainty a merger would take place.

They also said no decision had been made on how a deal might be structured.

Dixons operates more than 500 Currys and PC World stores in the UK and Ireland. Carphone Warehouse operates more than 2,000 stores across Europe.

Dixons Retail also owns the Elkjop group in the Nordic region and the Kotsovolos retail business in Greece.

Shares in both companies jumped on news of the merger talks. Dixons Retail climbed 7.5%, while Carphone Warehouse was up 6%.

The two companies said: "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. No decision has been reached regarding the structuring of any such merger."

Dixons recently reported strong Christmas trading, with like-for-like sales in the UK and Ireland up 5% in the three months to 4 January. The company has benefited from the demise of its competitor, Comet.

Carphone Warehouse reported like-for-like sales up 3% in the three months to 28 December.

Phones4U, Carphone Warehouse's rival, has a partnership with Dixons, and offers mobile phones to customers at PC World and Currys.

Consolidation trend

Maureen Hinton, retail research director at Conlumino, said a merger would be a "good deal" for both companies as they were in "very competitive" sectors.

She said the retail industry was changing, as online shopping now accounted for a "much greater share" of the market.

"Quite a lot of players have left the market as they just can't survive," she added. "It just seems consolidation is the best way to go."

However, consolidation could be worse news for consumers, she said, if it meant there were fewer firms in the market competing over price.

Regulation to prevent a monopoly of the mobile phone market could follow at a later stage, should this be the case, she added.

Independent retail analyst Nick Bubb said: "In a world of connected devices, Dixons is underexposed to the key area of mobile/smartphone retailing, and it is known that they were looking at the area.

"It is a bold move for Dixons; it is slightly harder at this stage to see what's in it for Carphone."

The companies, as required by Britain's Takeover Panel, will have to announce their intention to make an offer by 24 March.