Dixons Retail, Europe's second-biggest electricals goods retailer, has struck a deal to merge its loss-making UniEuro business in Italy with a firm controlled by private equity group Rhone Capital.

The agreement will see Dixons provide the merged business with €25m of cash and invest €10m in it in the form of a loan note.

Dixons said it will own a 15% share of the new company, while Rhone Capital will hold 85%.

The merged business will trade from 173 owned stores as well as through a number of franchise partners.

Dixons owns PC World and Currys in Ireland.