Dixons will merge with Carphone Warehouse and create hundreds of new jobsReuters

Carphone Warehouse and Dixons are set to merge after the boards of the two retailers gave the green light to a tie-up that will create hundreds of new jobs.

The new entity will be called Dixons Carphone and the pair claim that cost savings under the deal will reach as high as £80m.

"The boards of Carphone and Dixons recognise that in order to achieve the expected benefits of the merger, operational and administrative restructuring will be required following completion," said the statement.

A spokeswoman for consumer electronics specialist Dixons told IBTimes UK that though there would be more jobs on a net basis across the whole merged business, some roles at the headquarters would be at risk as a result of the deal.

Both firms command a combined 1,300 stores in total across the UK. The deal will be made on a 50-50 basis with Dixons and Carphone Warehouse, a mobile phone retailer, merged as equals.

The chief executive of Dixons Carphone will be Sebastian James, who is currently boss of Dixons. Carphone Warehouse chief executive Andrew Harrison will be James's deputy.

"With Dixons large format store presence and Carphone's multiple small store format, the merger from a purely footprint viewpoint makes sense, as this gives both customer sets the opportunity for additional services such as click and collect," said Jeremy Davies, CEO of consumer technology market analyst CONTEXT.

"However, just because the companies have merged does not mean that the challenges both companies are facing in future will go way, such as the explosion in online buying, decline in bricks and mortar retailing, and rapid growth in wifi connectivity challenging operator data revenues."

Electronics retailer Dixons has seen its fortunes turn around in recent months as some of its rivals succumbed to the tough environment in the struggling retail sector, such as Comet.

It has focused on better customer service and competitive pricing, which paid off during a strong Christmas trading period.

Moreover, Dixons has stripped away poor-performing arms of its business, including e-commerce site PIXmania.

A tie-up with Carphone Warehouse will lengthen Dixons' reach into the mobile phones market.

It reported 3% growth in like-for-like sales across the whole group for the year to April 30 and expects full-year pre-tax profit to reach the top end of expectations, at between £150m and £160m.

Carphone Warehouse was hit by slower revenues in the build up to Christmas 2013, as sales dipped 6.9% on the year before to £922m in the 13 weeks to 28 December.

This was off the back of fewer new pay-as-you go mobile phone customers.

But it bounced back with like-for-like sales growth of 2.3% over the year for its fourth quarter ending on 29 March.

Full year pre-tax profit should be within its previous guidance, at between £145m and £155m.