Best Buy shares rise on plan to exit Europe

NEW YORK (AP) -- Shares of Best Buy Co. jumped 8 percent Tuesday, after the electronics company said it will sell its stake in Best Buy Europe to Carphone Warehouse Group PLC.

THE SPARK: The Minneapolis-based chain will sell its 50-percent stake in the joint venture for 500 million pounds (about $775 million) in a cash-and-stock deal. The boards of both companies support the transaction.

THE BIG PICTURE: Best Buy and Carphone Warehouse started the Best Buy Europe joint venture in 2008. Best Buy's move is an effort to focus on its U.S. business and strengthen its balance sheet. Best Buy has been working hard to improve its business under CEO Hubert Joly as it faces tough competition from online retailers and discounters. It has cut jobs, invested in training employees and started matching online prices.

THE ANALYSIS: Deutsche Bank analyst Mike Baker said in a note to investors that positives like cost cutting and price matching should help drive better-than-expected first-quarter results when the chain reports on May 21. He raised his price target to $28 from $17 and changed his rating to "Buy" from "Hold."

Jefferies analyst Daniel Binder also applauded the deal. "The sale of this non-core asset is good for Best Buy and will prove to be one less distraction for management. This sale simplifies the business as well as financial reporting."

SHARE ACTION: Shares rose $1.94, or 8 percent, to $26.14, reaching a 52 week high of $26.92 at one point in the session. The stock has traded between $11.20 and $26.92 over the past 52 weeks.