American multinational consumer electronics corporation Best Buy has entered into a definitive agreement to offload its 50% stake in European joint venture with CarPhone Warehouse (CPW) for £500m.

The divestment amount comprises £420m in cash and £80m in CPW stock subject to a 12-month lock-up restriction.

Both the partners have previously agreed that CPW will be able to place the CPW shares on behalf of Best Buy, during the lock-up period, at or above the issue price.

As per the agreement, however, if the share price exceeds the issue price then the additional proceeds will be retained by CPW.

CPW is also liable to pay the difference amount to Best Buy that it falls short when the sales of the CPW shares by CPW and market value of any remaining shares totals less than £64m.

Best Buy will, in turn, pay CPW an amount of £29m in compliance with its current agreements including Global Connect partnership, which will be terminated at closing.

Best Buy president and chief executive officer Hubert Joly remarked that after business review the company decided that it was the ideal time to sign the agreement.

"This transaction allows us to 1) simplify our business; 2) substantially improve our Return on Invested Capital, one of the five pillars of our Renew Blue transformation; and 3) strengthen our balance sheet.

"Each international market is different and the sale of our European operations should not suggest any similar action in our other international businesses," concluded Joly.

The transaction is scheduled to close by the end of June 2013.