(Reuters) - Darty Plc DRTY.L, Europe’s third-largest electrical goods retailer, plans to sell its Italian operations to Italy’s DPS Group SRL and take a 15 percent stake in it, sending Darty’s shares up as much as 10 percent.
France-based Darty, formerly known as Kesa, said it will pay electrical goods retailer DPS 3 million euros ($3.8 million) as part of the deal.
“The current business is sub-scale, operating in a difficult market with the achievement of a profitable market position highly unlikely in the medium term.” Darty Chairman Alan Parker said in a statement.
The cost of closure of the Darty Italy head office, along with certain working capital adjustments on completion, was expected to be about 11 million euros, the company said.
Darty Italy is a part of the company’s developing businesses division, which also includes Spain and Turkey.
For the year ended April 30, Darty Italy’s operating loss was 55.7 million euros, which included 36 million euros in impairment charges and costs related to store closures.
The retailer is battling aggressive discounting from online retailers, along with low growth, high unemployment and brutal government spending cuts in Europe.
Wednesday’s sale is part of Darty’s ongoing review of its country-by country operations.
Darty had to pay a 50 million pounds ($80.4 million) dowry to a private equity firm last year to take its loss-making UK business Comet off its hands.
Shares in Darty were up 6.82 percent at 47 pence at 0950 GMT on the London Stock Exchange. They rose as much as 48.5 pence earlier.
Reporting by Karen Rebelo in Bangalore; Editing by Maju Samuel