Dixons takes control of Italian retailer

Exercise options

Dixons is to pay €368m to take control of UniEuro, described as Italy's leading independent electronics retailer.

Dixons already owns 24 per cent of the company, acquired last year, and had an option to buy the rest, which it is now exercising through the acquisition of 71 per cent of the outstanding share capital. Post acquisition, Dixons will have 96 per cent of the company. It has an option to buy the balance, controlled by management, for € 29.8m in July 2004.

Dixons is the UK's biggest and most profitable retailer of consumer electronics and personal computers. But there is not much room for huge market share gains here. So in recent years it has been collecting retailers on the Continent and Ireland, to the extent that Europe now accounts for 14 per cent of turnover.

There is plenty of room for growth in Italy, a very fragmented market. UniEuro is Italy's second biggest electrical retailer with 4 per cent of the market. And number one, Media World (part of German giant Metro) has 6-7 per cent, Dixons group FD Jeremy Darroch told Bloomberg.

UniEuro has 88 mostly out-of-town centre multi-category electronics superstores, concentrated in the northwest and north-east of Italy. It also has a new format, PC City, which opened its first store near Milan ast month. Dixons has an initial launch target of eight PC City stores.

Dixons says the acquisition will enhance earnings, before amortisation of goodwill, from Day One. It goes without saying that Dixons will be able to negotiate even better buying terms and co-op marketing funds from PC and electronics vendors.

However, Moody's expresses caution, and has cut the outlook on Dixons debt from stable to negative. The credit rating agency says the buyout, which is fully debt-financed, is "reasonably priced and likely to
prove accretive to Dixons' cash generation over the medium term. However, it will result in a more
leveraged financial position," the AFX newswire reports. ®

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