Dixons pays 25 million euros to solve Italian problem

Reuters

Updated 10 October 2013 at 9:00 am

LONDON (Reuters) - Dixons Retail , Europe's second-biggest electrical goods retailer, has agreed to pay 25 million euros ($34 million) to merge its loss-making UniEuro business in Italy with a firm controlled by private equity group Rhone Capital.

Dixons' plan is to focus on markets where it has a leading position and combined stores and internet business, such as the UK, Nordics and Greece.

Last month the firm, home to the Currys and PC World chains in Britain, Elkjop in Nordic countries and Kotsovolos in Greece, struck deals to sell its loss-making French e-commerce business PIXmania and Turkey's ElectroWorld, leaving Italy as its remaining headache.

Dixons said on Thursday it had signed a deal with the shareholders of SGM Distribuzione, which trades as Marco Polo in Italy, to form a new company that will own both UniEuro and Marco Polo, sending its shares up 4 percent.

Rhône Capital is the controlling shareholder of Marco Polo and will become the controlling shareholder of the new merged company. In total the owners of Marco Polo will own 85 percent of the merged business, while Dixons will own 15 percent.

Dixons said it would provide 25 million euros of cash to the new business and invest up to 10 million euros in it in the form of a loan note. The merged business will trade from 173 owned stores as well as through a number of franchise partners.

UniEuro made a pretax loss of 4.1 million pounds ($6.53 million) in the year to April 2013, on sales of 516 million pounds.

Dixons said the deal, anticipated to close at the end of November, was expected to be accretive to underlying earnings in its 2013-14 financial year.

Commenting on the Italy, Turkey and PIXmania deals, Dixons Chief Executive Seb James said: "I have no doubt that this increased simplicity and clarity will enable us to deploy our resources better and drive better value for all of our stakeholders."

Shares in Dixons, which have more than doubled over the last year, were up 1.8 pence at 45.9 pence at 1230 GMT, valuing the business at 1.68 billion pounds.

(Reporting by James Davey; editing by Kate Holton)