Dixons Signs Agreement to Buy Russian Appliance Retailer
Apr 15, 2005
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Dixons Group plc, a leading European electronics retailer, announced that it has signed a long-term co-operation and call option agreement with Eldorado Group, an appliance electronics based in Russia and Ukraine.
Under the agreement, Dixons will have the exclusive right, but not the obligation, to take control of Eldorado Group before 2011. This right is subject to Dixons exercising its option to acquire an initial 10 percent of the equity of Eldorado before 2008. The price for 100 percent of the equity of Eldorado Group is fixed at U.S. $1,900 million. If Dixons Group exercises its right to take full control of Eldorado Group, an element of the payment for the equity will be deferred until 2 years after taking control.
"This is a great opportunity for the Dixons Group and is consistent with our growth strategy. Russia is a market with enormous potential and Eldorado Group is the ideal strategic partner," John Clare, chief executive of Dixons, said. "It has a clear leadership position in the market, a strong management team with impressive retail skills and an exceptional track record of rapid, profitable growth. By entering into this agreement we will work closely with Eldorado Group management to develop a better understanding of the Russian market before committing the group financially."
Eldorado Group has an estimated 22-percent market share in Russia and trades from 610 stores covering all regions of Russia and Ukraine, 320 of which are operated by franchisees.
The companies said they will work together through a steering committee, senior management, and participation in initiatives of mutual interest. If Dixons Group takes up its option, it will be entitled to board representation proportional to its interest in the share capital of Eldorado Group.
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