Belfast Telegraph

Dixons merger will lead to job losses, warns corporate expert

By Lesley Houston

The merger of Dixons Retail and Carphone Warehouse could result in greater job losses than the 2% anticipated, a Northern Ireland corporate lawyer has warned.

PC World owner Dixons Retail yesterday announced plans to merge with Carphone Warehouse in a £3.7bn deal that aims to plug in to the way technology is transforming modern households.

The new retail giant will usher in a new era of connectivity between smartphones, tablets and rapid internet speeds and mundane household appliances.

Dixons has more than 500 stores across the UK and Ireland while Carphone Warehouse, founded in 1989, has around 2,000 stores including more than 800 in the UK.

There are nine PC World stores in Northern Ireland and five Carphone Warehouse shops.

Together, the joined companies have combined sales of £12bn, employing more than 43,000 people across Europe.

The merger was announced as leading to “significant job creation”, increasing retail jobs by 4%, though efficiency savings from combining support functions would results in a jobs cut of 2%.

However, Belfast solicitor John-George Willis, head of Tughans Solicitors’ corporate department, said he did not wish to “scaremonger” but added that he feared the jobs cuts could be much greater than the 2% which has been predicted.

Mr Willis said previous mergers had resulted in much “greater rationalisation” than the coupling firms ever envisage.

Announcing the merger, Dixons chief executive Sebastian James, said: “The ability to take what we have built in electrical retailing and add the profound expertise of Carphone Warehouse in connectivity would make us a leading force in retailing for a connected world.”

Carphone founder, Sir Charles Dunstone, added: “We see the merger of these two great companies as an opportunity to bring our skills together for the consumer and create a new retailer for the digital age.”

Mr Willis painted a bleak picture for jobs as a result of the merger.

He said share prices of both companies fell once the announcement was made yesterday due to what he perceived as “the scope for substantial rationalisation”.

“This is a 50/50 merger and that, perhaps, is what caused Dixons’ share price to go down, with the perception that it is maybe worth more.

“You can see the strategic rationale for linking the two businesses — it’s about connectivity and you have one which sells the devices and the other which connects them to the internet.

“There will be synergies there and they predict 4% job creation and 2% job cuts but I’m sceptical that they will hold the job cuts to 2%.

“Looking at the number of the stores on the high street sitting alongside each other the question is whether they can hold the same number of employees? Absolutely not.

“I expect there will be substantial rationalisation over time, maybe not immediately. From past experience, watching similar mergers in recent times, there has been greater rationalisation than expected.

“I don’t want to scaremonger but in the recent history of mergers on high streets, the job rationalisation has been much greater than was initially announced. All you have to do is look at the Boots merger with the Alliance Group,” he said, stating job losses had been more than expected following the 2005 merger.

Analyst Louise Cooper said there was “likely to be much scepticism” about plans for better growth.

“Two past their sell-by date retailers merging does not an Amazon make,” she said.

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