DSG sought bid from Media Markt, but rebuffed: report

LONDON (Reuters) - Germany's Media Markt, Europe's biggest electrical goods retailer, has rejected a request from DSG International Plc (DSGI.L) to consider a bid for its closest rival, the Financial Times said on its Web site.

The FT.com, citing unnamed people familiar with both companies, said Britain's DSG, which trades as Currys and PC World in the UK, UniEuro in Italy and Elkjop in Nordic countries, first made the informal approach in the Spring.

It said Media Markt, owned by Metro AG (MEOG.DE), Germany's biggest retailer, was put off by the size of the potential deal.

"We never comment on speculation and rumor," a DSG spokesman said. "DSG is totally committed to its renewal and transformation plan. The management team led by John Browett is completely focused on that."

Media Markt and Metro could not immediately be reached for comment.

An industry source said an attempt to combine Europe's two biggest electrical goods retailers could meet opposition from anti-trust regulators.

"There would be some interesting conversations if it did happen," the source said, noting that DSG's and Media Markt's businesses overlapped in Italy and some Scandinavian countries.

Both DSG and Media Markt are battling a slowdown in consumer spending, exacerbated by growing competition from supermarkets and online retailers such as Amazon.com (AMZN.O).

On Wednesday, DSG reported a 7 percent drop in like-for-like sales for the 16 weeks to August 23.

The group, whose shares have slumped around two-thirds over the past year, launched a strategic review in May focused on improving stores and customer service, developing its online business and cutting costs.

Like-for-like sales at Media Markt and Saturn, Metro's electrical goods businesses, fell 0.8 percent in the first half of 2008.

Both DSG and Media Markt face fresh competition next year, when U.S. group Best Buy (BBY.N), the world's biggest electrical goods retailer, opens its first store in Europe as part of a joint venture with Britain's Carphone Warehouse (CPW.L) announced earlier this year.

Some analysts have suggested the venture might itself bid for DSG to gain stores and a distribution network.

But Roger Taylor, chief executive of the venture, told Reuters in July it was "too early" to talk of acquisitions and that its focus was on opening its own stores.

DSG runs just under 1,400 stores across Europe, while Media Markt has just over 500 outlets in 15 countries.

DSG shares closed down 2.2 percent at 56 pence on Friday, valuing the business at about 939 million pounds ($1.7 billion). Metro closed down 1.1 percent at 37.69 euros, giving it a market value of about 12.3 billion euros ($17.6 billion).

(Reporting by Mark Potter)