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By | Paul Kunert 5th September 2013 10:46

Dixons in talks to offload loss-making online mart PIXmania

Tells German VC: C'mon, buy our gadget souk. We'll give you €69m

Dixons Retail confirmed this morning it is trying to offload loss-making web bazaar PIXmania to German-listed industrial holding company mutares AG by dangling a multi-million pound dowry to fund operations.

The retailer says it will now enter a consultation period with PIXmania's Work Council, in line with French labour laws (its operations are based in France).

Under the terms of the offer, Dixons would cough €69m (£58.3m) in working capital for the "ongoing funding on the business".

Getting rid of PIXmania seems a bizarre strategy for Dixons, which had claimed retailers needed multiple routes to market to be successful in the 21st century.

Sebastian James, Dixons' CEO said: "In order to succeed as a pure play e-tailer, PIXmania needs a different kind of entrepreneurial vigour… outside of the group."

He added that if the "transaction progresses", mutares AG will acquire the business with a "well-funded balance sheet".

Aurélien Fauvel, head of mutares France, said: "We firmly believe PIXmania has a fundamentally strong business that can achieve long term success in its markets and we look forward to discussing our future plans with the employees and stakeholders."

Dixons splashed €266m for a 77 per cent stake in PIXmania in 2006 and spent another €10m last summer to buy out the founders remaining share.

The returns for Dixons and its shareholders on this deal don't appear to be positive.

PIXmania turned over £655m in revenues during Dixons's fiscal 2012 ended 28 April, down nine per cent year-on-year. It made an underlying operating loss of £20m, compared to a profit of £3.5m in the previous fiscal year.

Equanet boss Phil Birbeck was dispatched to improve results, but he was unable to turn things around.

In the last fiscal year ended April 2013, PIXmania's sales fell to £357.5m, and it made an operating loss of £31.3m. Restructuring costs of £64.6m helped to wipe out any profits the group had ground out.

Dixons also revealed today in a trading update that PIXmania sales in Q1 of fiscal '13 ending 31 July had slumped by 32 per cent in sterling but that the group was up four per cent. Dixons' like-for-like sales were up 2 per cent.

James described the start to the new fiscal as "encouraging" as margins held up "reasonably well".

Dixons is also exiting ElectroWorld operations in Turkey, having flogged it to Bimeks, a Turkish electrical specialist retailer, for £2m in cash over a two-year period – if certain targets are achieved. ®

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