Telecommunications retailer Carphone Warehouse has reached agreement with electricals retailer Dixons Retail to merge both companies, for £3.8bn.

The deal, agreed on terms of a recommended all-share merger of both companies, will be implemented by way of a scheme of arrangement of Dixons.

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Under the deal terms, Dixons Shareholders will receive 0.155 of a New Dixons Carphone Share in exchange for each Dixons Share.

The merged entity will be called ‘Dixons Carphone plc’, with 3,000 stores and sales of almost £11bn.

The shareholders of both Dixons and Carphone will hold exactly 50% taking into account existing share options and award schemes for both companies.

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Both the companies expect that the combined group will be able to achieve annual savings of at least £80m within three years.

The new entity is touted to be a leader in European consumer electricals, mobiles, connectivity and related services.

Dixons Carphone is looking to foray into domestic heating, lighting and security services besides retailing computers and household appliances.

It will also retail the combined broadband, pay TV and phone services offered by operators such as BT and Virgin, and to take commissions from supermarkets or music services for pre-installing their apps on smartphones.

Dixons is Europe’s second biggest electricals retailer by sales, and Carphone is Europe’s largest independent mobile-phone retailer.

Dixons operates more than 500 Currys and PC World stores in the UK and Ireland. It also owns the Elkjop group in the Nordic region and the Kotsovolos retail business in Greece.

Carphone Warehouse presently operates more than 2,000 stores across Europe.