Best Buy Co., Inc. · NYSE:BBY
Best Buy — Merger or Acquisition (May 2008)
42 slides from Best Buy's merger presentation, May 8, 2008
Slide 1: Formation of a new European venture: Bigger, Better, Faster, Together
Formation of a new European venture: Bigger, Better, Faster, Together 8 May 2008
Slide 2: Safe Harbour: Forward-Looking and Cautionary Statements
Safe Harbour Best Buy’s Forward-Looking and Cautionary Statements: This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the U.S. Securities Act of 1933 and Section 21E of the Securities Ex
Slide 3: Agenda
Agenda • Transaction overview Charles Dunstone • Introduction to CPW Charles Dunstone • Introduction to Best Buy Brad Anderson • Vision for the new venture Bob Willett • Q&A All
Slide 4: Transaction overview
# Carphone Cc] Warehouse —— BEST BUY. Transaction overview
Slide 5: The transaction
The transaction • Formation of new company • Assets comprise CPW’s pan-European retail business and its share of Best Buy Mobile and Geek Squad Europe • Best Buy to pay £1.088 billion ($2.142 billion) for a 50% share in the venture • Indicative timetable: • 8 May Announcement • By 13 June Circular p
Slide 6: Management structure
Management structure 3 from Best Buy 3 from CPW Shareholder board Existing CPW Management
Slide 7: Carphone Warehouse Group post transaction
Carphone Warehouse Group post transaction CPW Group PLC Retail business • Just over 2,400 stores • Web and direct • Insurance • The Phone House Telecom and other airtime reselling businesses UK Fixed Line business • TalkTalk • AOL Broadband • Opal B2B • CPW Networks 50% 100%
Slide 8: Financial impact on Carphone Warehouse
Financial impact on Carphone Warehouse • Pro forma net cash of c. £250m • Pro forma full year earnings per share dilution c. 10-15% • Use of proceeds • Pay down group debt • Invest in Fixed Line customer growth and infrastructure • Invest in new growth opportunities • All impacts based on Internatio
Slide 9: Introduction to Carphone Warehouse
Introduction to Carphone Warehouse
Slide 10: CPW Timeline
CPW Timeline 1989 94 95 96 97 98 99 00 Insurance launched now: 2.3m customers ARPU-sharing begins First MVNO launched FM contracts begin International expansion now: 2411 stores CPW founded
Slide 11: CPW Timeline
CPW Timeline 2000 01 02 03 04 05 06 07 Acquired Opal Telecom, B2B operator and network Launched TalkTalk Acquired Onetel Launched free broadband, began LLU project Acquired AOL TPHT acquired now: 1.6m customers Best Buy Mobile launched
Slide 12: CPW: at the forefront of new trends
CPW: at the forefront of new trends
Slide 13: CPW: success in Fixed Line
CPW: success in Fixed Line • Targeting 3.5m customers by March 2010 20 140 385 650 900 1300 2700 2700 2720 2740 2741 50 70 150 420 2270 2713 2490 0 1000 2000 3000 4000 5000 6000 3/2003 9/2003 3/2004 9/2004 3/2005 9/2005 3/2006 9/2006 3/2007 9/2007 3/2008 Customers (000s) Voice Broadband
Slide 14: CPW's investment in Broadband has paid off
CPW’s investment in Broadband has paid off Fixed Line EBIT and margin 0 20 40 60 80 100 120 140 FY06 FY07 FY08 consensus 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% EBIT (£m) Margin %
Slide 15: CPW: 10 year compound EPS growth of 25%
CPW: 9 year compound EPS growth of 25% 0 500 1000 1500 2000 2500 3000 3500 4000 4500 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Revenue £ (m) 0 2 4 6 8 10 12 14 EPS (p) Revenue (£m) Basic EPS (p) Investment in Broadband
Slide 16: The connected world is here
The connected world is here CPW's Mobile Broadband Weekly Sales, FY08 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Wk01 Wk05 Wk09 Wk13 Wk17 Wk21 Wk25 Wk29 Wk33 Wk37 Wk41 Wk45 Wk49 Connections (000s)
Slide 17: Consumer email platforms have taken off
Consumer email platforms have taken off CPW's Blackberry and Smartphone Weekly Sales, FY08 0. 1,000. 2,000. 3,000. 4,000. 5,000. 6,000. 7,000. 8,000. 9,000. Wk01 Wk04 Wk07 Wk10 Wk13 Wk16 Wk19 Wk22 Wk25 Wk28 Wk31 Wk34 Wk37 Wk40 Wk43 Wk46 Wk49 Wk52 Connections (000s)
Slide 18: Laptop unit shipments in Europe forecast to grow strongly
Laptop unit shipments in Europe forecast to grow strongly Western Europe data : Outlook by Form Factor 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Desktop Notebook 2008-2011 Estimated
Slide 19: CPW's laptop proposition is here
CPW’s laptop proposition is here • Took 8% share of UK laptop market with one model, Nov/Dec 2007
Slide 20: Working very well together in the United States
Working very well together in the United States Estimated US market share based on top 62 markets 1.7% 1.8% 1.2% 1.4% 1.5% 1.7% 1.7% 1.7% 1.6% 1.8% 2.9% 3.1% 1.8% 1.8% 1.9% 2.2% 2.3% 2.6% 2.6% 2.6% 2.3% 2.4% 4.4% 4.7% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% J F M A M J J A S O N D Mar
Slide 21: Best Buy is a leader in consumer electronics retailing
Best Buy is a leader in consumer electronics retailing 13% 16% 11% 15% 5% 21% 29% 23% 22% 7% Total Home Theater Computing/Dig. Imag. Music Appliances 2001 Market Share 2007 Market Share • #1 retailer of laptops in U.S. and Canada • Only retailer in U.S. to stock all the major computer brands
Slide 22: Pan-European opportunity
Pan-European opportunity z 7 Corpuone — BUY.
Slide 23: Best Buy's strategy focuses on owning the customer's home
The Living Room The Bedroom The Home Office The Kitchen Service The Car Best Buy’s strategy focuses on owning the customer’s home
Slide 24: CPW's strategy focuses on connecting the customer
Billing & Insurance Broadband and Fixed Line Wireless & MVNO CPW’s strategy focuses on connecting the customer
Slide 25: Together we can provide the complete connected solution
Billing & Insurance Wireless & MVNO Broadband and Fixed Line The Living Room The Bedroom The Home Office The Kitchen Service Data Voice Movies TV Music Games Together we can provide the complete connected solution to the customer
Slide 26: Introduction to Best Buy
# Carphone Cc] Warehouse —— BEST BUY. Introduction to Best Buy
Slide 27: Best Buy: Growth as a large company
($ in billions) Revenue Growth Diluted EPS1 1 FY02 through FY05 have been adjusted for FAS 123 expense ROIC2 2Fiscal years 2002 thru 2005 have not been adjusted for FAS 123 expense 20% CAGR 15% CAGR +3Pts Best Buy: Growth as a large company FY08 Results Total revenue growth 11% Comp revenue growth 2
Slide 28: Our Global opportunity
~$175 B ~$160 B ~$80 B ~$17 B NewCo < 3% Share BBY ~ 21% Share Dual Brand ~ 1% Share Dual Brand ~ 35% Share CE Market Our Global opportunity Source: Verdict, Mintel, Euromonitor, OC&C analysis, and internal data
Slide 29: Goals for the new venture
# Carphone Cc] BEST BUY. warehouse Goals for the new venture
Slide 30: Goals for the new venture
• Continue to grow CPW’s existing retail business through physical expansion in its existing European markets, and accelerating its current evolution towards mobile and fixed line connectivity • Build a significant market share in consumer electronics retailing in Europe, through the roll-out of Bes
Slide 31: The Connected World
Billing & Insurance Wireless & MVNO Broadband and Fixed Line The Living Room The Bedroom The Home Office The Kitchen Service Data Voice Movies TV Music Games The Connected World
Slide 32: Appendix
# Carphone Cc] Warehouse —— BEST BUY. Appendix
Slide 33: Best Buy History
Humble Beginnings • Founded 1966 by Richard Schulze as “Sound of Music” Forging New Paths • Name changed to “Best Buy” in 1983, first superstore opens • Listed on NYSE in 1987 Reaching New Heights • Best Buy enters Fortune 500 in 1995 • #1 Market Share in US in 1999 • Expand into Canada 2001, China
Slide 34: Best Buy - A History of Growth
$ in billions Best Buy - A History of Growth $ in billions 24 stores in U.S. 1,314 stores in U.S., China, Canada From $200 million to $40 billion in 21 years $0.2 $0.5 $1.6 $5.1 $10.1 $17.7 $20.9 $24.5 $27.4 $30.8 $35.9 $40.0 FY87 FY90 FY93 FY95 FY99 FY02 FY03 FY04 FY05 FY06 FY07 FY08
Slide 35: North American Leader
Stores FY08 End 1,153 stores Future 1,600 stores Canadian Market Share Over 30% Total U.S. Market Share Canadian Market Store Presence Calendar Year Best Buy US Market Share - Products Based on Calendar Year North American Leader 17% 21% 20% 18% 10% 12% 14% 16% 18% 20% 22% 1999 2001 2003 2005 2006 2
Slide 36: Best Buy FY08 Highlights
• Achieved significant milestone of $40B in enterprise revenues • Delivered 12% EPS growth in challenging U.S. environment • Operating income improved 8% and repurchased 75.6 million shares • Continued to grow market share, customer satisfaction and loyalty; improved employee turnover to 60% • Made
Slide 37: Best Buy Revenue Mix and Growth
Appliances Home Office Entertainment Software Consumer Electronics Services Other Total Revenue Mix Summary Year Ended March 1, 2008 Comparable Store Sales Year Ended March 1, 2008 41% 28% 19% 6% 6% <1% 100% (1.3%) 7.1% 7.9% (2.6%) 5.5% n/a 2.9% Best Buy Revenue Mix and Growth
Slide 38: Best Buy Category Description
Best Buy Category Description Extended warranties, computer and home theater set-up/installation/repair and deliveries Services Washers & dryers, refrigerators, stoves, dishwashers and air conditioning products Appliances Video gaming hardware and software, DVDs and CDs Entertainment Software Comput
Slide 39: Best Buy's Brands
Best Buy’s Brands • Flagship brand, operating 975 stores in the U.S., Canada and China • Large format boxes selling consumer electronics and entertainment products, 21% market share in the U.S. • Founded in 1982, Canada’s largest consumer electronics retailer by 1990 • Purchased by Best Buy in 2001,
Slide 40: Best Buy's Brands
Best Buy’s Brands • Founded in 1994 as a 24-hour computer support service, purchased by Best Buy in 2002 • Agents operating in all Best Buy, Geek Squad standalone, and select Carphone Warehouse stores • Founded in 1954 in Seattle, WA; purchased by Best Buy in 2000; specializes in high-end home theat
Slide 41: Best Buy's Brands
Best Buy’s Brands • Founded in 1994 as an Internet café in Seattle, now is an industry leader in broadband services • Acquired by Best Buy in 2007, provides end-to-end voice and data solutions to small business customers • Founded in 1989 as a residential custom installation provider • Purchased by
Slide 42: Best Buy's Global Presence
USA Canada China 923 - 7(2) 13(3) 19 - 190(1) 51 131 - - - - - 1 - - - - 160 - Total 975 131 19 160 190(1) 1 Includes 181 Best Buy Mobile store-in-store locations and 9 Best Buy Mobile stand alone locations. 2 Stand Alone locations only. Geek Squad Precincts can be found in all Best Buy locations an