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Best Buy to buy partner's stake in Europe venture

November 07, 2011|By Thomas Lee

Reporting from Minneapolis — Best Buy Co. said Monday that it will shut down its 11 big-box stores in Britain and buy out Carphone Warehouse's interest in a joint profit-sharing agreement for $1.3 billion.

The Richfield, Minn., company also said it will launch a venture with Carphone Warehouse called Global Connections that will advise retailers around the world on how to boost performance of their mobile products businesses and services, in the mold of Best Buy Mobile.

Best Buy's announcement is a tacit admission that its $2.1-billion joint venture with Carphone Warehouse, first announced in 2009, has not lived up to expectations.

Under that agreement, the two retailers formed a new company called Best Buy Europe, in which each side owned a 50% stake. The company included all of Carphone Warehouse's stores in such countries as Spain, France and Portugal and new, large-format stores under the Best Buy logo in Britain.

But amid a weak European economy and tough local competition, the British stores struggled to gain traction, and British media have reported rumors that Best Buy would soon close them.

Best Buy's partnership with Carphone Warehouse was not a complete wash. The two sides collaborated on Best Buy Mobile in the United States, in which Carphone Warehouse earned substantial income from a profit-sharing deal.

Best Buy said it would take a $250-million to $270-million charge in fiscal 2012 to close down its British stores. It will also assume a charge of $1.2 billion to write down Best Buy Europe goodwill.

Best Buy also said it would buy MindShift Technologies Inc. for $167 million. The company provides IT services, such as cloud-based data centers, to small and medium-size businesses.

Shares of Best Buy fell 3.1% to $26.46.

Lee writes for the Minneapolis Star Tribune/McClatchy.

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