Dixons Carphone Merger Is Boardroom Challenge
Ever since Carphone Warehouse and Dixons announced in February that they were in merger talks, there has been much speculation as to what was in it for both sides.
This applies particularly for Carphone, which does not currently sell many of the products that Dixons does via its various outlets and - its ill-fated tie-up with America's Best Buy aside - has shown little interest in expanding much beyond mobile phones.
Yet there is industrial logic in the pair combining. The most obvious is the £80m, at least, the pair reckon they will be able to save annually by pooling their buying power.
City analysts suspect that is conservative and that the annual saving will be nearer £100m.
But the benefits do not stop there. The main advantage for Dixons is that it currently lacks a significant presence in mobile phones and, in particular, the fast-growing area of smartphones. Joining forces with Carphone removes that at a stroke.
For Carphone, despite some City scepticism, there are also advantages.
The first and most obvious is that Phones4U, its rival, must now surrender the 150+ concessions it presently enjoys in Dixons stores.
However, there is also a defensive quality to this arrangement, as joining forces with Dixons will, to an extent, insulate Carphone from changing trends in the mobile world.
Mobile operators, which give Carphone and Phones4U a percentage of revenues when they sign a customer to their networks, are increasingly opting to cut out the middleman and sell directly to customers both online and on the high street.
Three, the smallest mobile operator, has already stopped selling through the pair while the other three players, EE, O2 and Vodafone, are all expanding their high street presence.
So, for Carphone, joining forces with a partner to diversify its revenues will help protect it from these trends.
The wider appeal for both is that magic word, convergence. Many of the electrical goods sold by Dixons, such as fridges, ovens, lights, televisions and alarm systems, will increasingly in future be controlled by smartphones and other mobile devices. That will create opportunities to sell such products in tandem.
If there is a concern, it is the composition of the merged company and its board.
So-called 'nil-premium' mergers, like this one, inevitably flounder. Everyone seems to have a space in the executive car park.
Sir Charles Dunstone, Carphone's co-founder and chairman, becomes chairman of the merged entity while his long-standing lieutenant, Roger Taylor, is one of two deputy chairmen along with the Dixons chairman, John Allan.
The Dixons chief executive, Seb James and chief financial officer, Humphrey Singer, take those two posts in the enlarged company but there is also room for Andrew Harrison, the Carphone chief executive, who becomes deputy chief executive, as well as two other executive directors - Katie Bickerstaffe from Dixons and Graham Stapleton from Carphone - as well as no fewer than six non-executive directors.
That makes for a very crowded boardroom and creates plenty of scope for conflict among the executives as they jostle for position.