City & Corporate: Time will judge Dixons' true grit

When British retailers venture abroad they normally find the going tough.

As the cliche has it, 'retail is detail' and it is those small subtleties of taste and style of which only the locals are aware that make the difference between success and failure.

Boots, Marks & Spencer and WH Smith have all endured overseas disasters.

Now it is Dixons' turn. It is not just going abroad, it is going to Russia, probably the most corrupt developed market in the world. It may or may not be the right thing to do, and promising to pay £1bn or more for an existing fast-growing electronic goods retailer may or may not be the right way in.

What is interesting is the way in which the firm has tailored its acquisition plan to a PR, not a business, agenda. Thus it is paying more than £100m now for an option to buy an even more costly option in 2008, to give it the right, though not the obligation, to buy the entire business three years after that for a price fixed today at around £1bn.

The PR line is that this gives Dixons time to learn about the business and the Russian market before committing itself. But can one really believe that? The truth is that those with minority stakes are kept at arm's length by the existing owners and learn little about the business. So what is good PRwill most probably turn out to be bad business practice.

In reality, though, in these media-conscious days Dixons probably had no choice. Had it announced a full-blooded £1bn bid for the Russian company - or even a firm commitment to spend £500m buying half - its investors would have been appalled and its share price would have crashed. That would have made financing the purchase nigh impossible.

Doing it this way may well be more costly but the share price barely fluttered, shareholders approved and the firm was praised for its boldness and its caution. Given the scale of what is being attempted, that by any measure is a PR triumph.

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