Currys and PC World group DSG, formerly Dixons, yesterday abandoned a plan to buy a Russian electricals retailer after a review of other companies in the country.
DSG’s chief executive John Clare had an option to take control of Eldorado, Russia’s biggest electricals retailer – but had to put up £100m of a total £1bn purchase price by the end of this year. Eldorado has 1,000 stores – 20% of the market in Russia and Ukraine – and was described as a “great opportunity” two years ago.
Yesterday, Mr Clare said that after a thorough analysis of Eldorado and Russia, the DSG board had decided the deal was a bad move: “We have done comprehensive due diligence covering a host of things including looking at other companies in Russia in the retail sector and beyond. Overall the board has concluded it would not be in the interests of shareholders to pursue the option. That is about as much as I can tell you.”
The £100m set aside for the deal will now be returned to shareholders through a buyback. The decision to pull out of Russia was unveiled as DSG posted full year profits down 5% to £295m – before a £170m one-off charge linked to the costs of restructuring the group’s underperforming Italian chain, UniEuro, and shutting the loss-making PC City outlets in France.
Mr Clare, however, insisted that DSG’s strategy to increase its international presence was the right one. He said DSG would probably look again at Russia in the future. Like for-like sales at DSG climbed 4% on the previous year, driven by sales of laptops and flat-panel TVs. The results were the last to be delivered by Mr Clare, who is to step down after 13 years as chief executive. DSG has named John Browett of Tesco as his successor.
Julia Finch and Simon Bowers
Thursday June 21, 2007
The Guardian