Dixons Retail is to pay €25 million (£21 million) to offload its loss-making Italian UniEuro business.
Under the agreed deal, the business will merge with a firm owned by the private equity group Rhone Capital.
SGM Distribuzione, which trades as Marco Polo in Italy, will combine with UniEuro to create a new company, which will trade from 173 stores and through franchise partners.
Following the announcement of the deal, Marco Polo’s share rose by four per cent, while Dixons’ shares rose by 1.8p to 45.9p, valuing the firm at £1.68 billion.
Dixons, which will provide the €25 million and up to €10 million (£9 million) in a loan note to the new business, will control 15 per cent of the company, while Marco Polo will hold 85 per cent.
On the back of sales worth £216 million, UniEuro made a pretax loss of £4.1 million in the year to April 2013.
The deal follows Dixons’ previous moves to cut ties with its loss-making European operations, selling the France-based online tech retail store Pixmania and the Turkish retail operator ElectroWorld last month.