U.S. retailer Best Buy Co Inc is selling its 50 percent stake in a joint venture with Europe's biggest independent mobile phone retailer Carphone Warehouse Group PLC back to its European partner for about 500 million pounds (or $775 million).
The move is the latest sign the world's largest consumer electronics chain is scaling back its overseas ambitions to focus on its mainstay U.S. business, which faces cut-throat competition from the likes of Wal-Mart Stores Inc and Amazon.com Inc .
The deal will strengthen Best Buy's balance sheet, simplify its business and improve its return on invested capital, CEO Hubert Joly said in a statement on Tuesday, adding that the timing and economics felt right for the deal.
Best Buy bought 50 percent of Carphone's retail operations for about $2.1 billion in 2008 to tap the British firm's expertise in mobile phones and to act as a springboard for expansion across Europe.
While Best Buy was able to use Carphone's proficiency to boost its U.S. mobile phone business, the plans for a chain of European megastores fell apart due to weak consumer spending, low brand recognition and competition from local chains.
Ultimately, in 2011, Best Buy scrapped plans for the chain of European megastores and decided to focus on Carphone's existing smaller format stores there. It also bought Carphone out of its U.S. mobile phone joint venture for $1.3 billion.
On Tuesday, Best Buy said it had estimated its European unit to have sales of $5.5 billion to $5.6 billion, and "immaterial" diluted earnings per share, excluding items, in the current financial year.
Outside the United States, Best Buy currently operates in Canada, China, Europe and Mexico.
The sale of Best Buy's European operations "should not suggest any similar action" in other overseas markets, Joly said in the statement on Tuesday.
The boards of both companies have approved the deal, which is expected to close by the end of June. Best Buy expects to take a related non-cash asset impairment charge of about $200 million.
The sale price of 500 million pounds (or $775 million)included 420 million pounds in cash and 80 million in Carphone's stock.
Also, as part of the deal, Best Buy has agreed to pay Carphone 29 million pounds (about $45 million) to satisfy obligations under existing agreements.
Once completed, the deal will also mark the end of their "Global Connect partnership," which was aimed at replicating Best Buy Mobile's success in emerging markets like China.
(Reporting By Dhanya Skariachan; Editing by Michael Urquhart)