NEW YORK (TheStreet) - Best Buy (BBY) shares surged to a 52-week-high on Tuesday as the company said it sold its stake in a five-year-old European joint venture with London-listed Carphone Warehouse Group in a deal valued at $775 million.
The stock closed up 7.5% to $25.98. More than 22 million shares were traded on Tuesday, almost double the normal daily trading volume. Earlier in the day, the stock briefly hit a new 52-week-high of $26.92.
The Richfield, Minn.-based electronics retailer entered into an agreement on Monday that provides for the sale of the 50% interest held by the company in Best Buy Europe, its joint venture with Carphone Warehouse, according to a Securities and Exchange Commission filing today.
Best Buy will exit the venture while Carphone Warehouse will assume 100% ownership of the venture, the filing said.Best Buy also got a vote of confidence from Deutsche Bank (DB ) after analyst Mike Baker upgraded the stock to "buy" from "hold." "We see a number of positive catalysts to come in 2013, including better than expected earnings results" in the first quarter, Baker wrote in a note on Tuesday. >>>Best Buy's New Life After Takeover Trauma "Other positives include continued cost cutting, which should drive long-term earnings power increases, potentially peaking competitive pressures, and a strong balance sheet that will at some point enable a resumption of buyback activity," the note says. "While the stock is up nearly 2x from the bottom, it's up only 5% in the past 12 months vs 13% and 15% for the S&P 500 and S&P Retail Index. It has come off 11% from the recent peak, enabling a good entry point." Baker's new 12-month price target is $28. The Deutsche Bank analyst also raise his first-quarter 2013 earnings estimate by a penny to 32 cents per share. Baker's estimate comes in at the high range of earnings estimates for Best Buy. Analysts on average expect Best Buy to report first-quarter earnings of 24 cents a share. According to the agreement, the total purchase price of the transaction is expected to be approximately $775 million, which will be payable to Best Buy shareholders as follows:
- Approximately $573 million in cash at closing;
- $124 million in the form of ordinary shares of CPW at closing;
- $39 million, plus 2.5% interest per year, in cash on the first anniversary of closing;
- Finally, another $39 million, plus 2.5% interest per year, in cash on the second anniversary of closing.
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