Britain's largest electronics and appliance retailer has registered a stock issue to raise capital in U.S. markets, a move analysts said might be a step toward forming a national chain in this country.
The British firm, the Dixons Group, has already acquired two U.S. electronics and appliance retailers and has been rumored on Wall Street to be a possible bidder for Baltimore-based Luskin's, a chain of 52 stores located mainly in the Baltimore-Washington area.
Dixons officials declined to comment on the Luskin's reports, but acknowledged they are familiar with the company.
Said one Dixons official, "We're very excited about the states. ... They have no nationally successful electronics retailer the way we have here in Britain."
"Dixons is looking to pick up small regional chains" to build a company that spans the United States, said Robert Snaith, an analyst at Strauss-Turnbull in London. "You are, after all, the biggest comsumer market on earth."
Following two days of unusually heavy trading of Luskin's stock, Luskin's announced Aug. 4 that it had held unsolicited talks with an undisclosed potential buyer. The company said previous talks with other potential buyers had not led to a sale.
Chairman Jack Luskin this week declined to comment on the Dixons rumors or to say whether Luskin's is for sale, although another company official said after the announcement that Luskin's was interested in pursuing the talks.
Securities analysts who follow the electronics retailing industry said Luskin's would be a logical target for Dixons, fitting neatly alongside the company's other stores with little geographic overlap.
Dixons Group recently acquired Cyclops Corp. of Pittsburgh, then sold everything but the Silo Division, the third-largest U.S. electronics retailer. Silo, which operates 121 stores in 17 states and had 1986 sales of $494 million, is a major retailer in Pennsylvania.
Dixons then agreed on July 9 to buy Tipton, a 24-outlet chain in the Midwest, including 10 stores in St. Louis. Tipton had $84 million sales in the year ended March 31.
Dixons filed July 31 with the Securities and Exchange Commission to issue American depository receipts, a form of equity that represents shares listed on the London Stock Exchange, to be traded on the New York Stock Exchange. Foreign companies use ADRs to raise capital in U.S. markets without having to meet more restrictive disclosure rules for U.S. stock offerings. The ADR registration statement estimated proceeds from the offering at $56 million.
"The company intends to use the net proceeds of this offering to broaden the capital base of the company and to facilitate its further expansion, particularly in the United States," Dixons said in the filing.
Because ADRs are traded in the United States, they could be used to acquire American retailers via stock swaps. For tax reasons, stock swaps are more attractive than cash to the owners of many businesses.
Analyst Snaith said Dixons researched the U.S. market extensively before entering it with the purchase of two electronics chains. "I would give it a very good chance of succeeding in the states. ... Dixons is a wonderful business, very well managed," he said.
The speculation about a possible takeover set off a flurry of activity in Luskin's stock earlier this month. The shares sold for as much as $8.75 on Aug. 4 -- the day reports of the takeover talks were published -- but closed that day at $6.50. Yesterday, in over-the-counter trading, Luskin's shares were quoted at $5.75.
Luskin's had sales last year of $110 million and earned $4.3 million in profits. Since he founded the chain in 1948, Chairman Jack Luskin has steadily added stores in the Baltimore-Washington area and in recent years expanded by buying the Tokyo-Shapiro chain in Ohio and the Hi-Fi Buys, Buyys and Sound Room operations in Indiana, Michigan and Kentucky.