L1 Retail Launches Voluntary Tender Offer and €500m Conditional Capital Increase as Part of a Comprehensive Rescue Plan for DIA

MADRID, Feb. 5, 2019 /PRNewswire/ -- L1 Retail, an international investment business with proven world-class retailing and retail transformation expertise, and owner of 29% of DIA, the Spanish food retailer, today announces a voluntary tender offer and comprehensive rescue plan to secure the future of DIA. L1 Retail believes that under the right leadership and governance, DIA can deliver a transformation and re-establish its leading position in Spain to the benefit of the Spanish economy. To achieve this, L1 Retail is committed to support a €500m capital increase following the successful completion of its VTO.

The L1 Retail rescue plan, 'MAKE DIA A CHAMPION', consists of three integrated components. First, a VTO for the acquisition of all the shares in DIA that it does not already own at a price of €0.67 per share, a significant premium of 56.1% to the closing price on 4 February, 2019. Second, a commitment to support a capital increase of €500m to achieve a viable long-term capital structure, which is conditional upon the completion of the VTO and reaching a satisfactory agreement with DIA's lending banks. Third, a comprehensive six-pillar transformation plan, led and overseen by L1 Retail, which is expected to deliver a turnaround of the business over the next 5 years.

Why L1 Retail is taking action now

DIA is demonstrably undergoing serious financial difficulties, and L1 Retail believes DIA urgently requires a transformation driven by a world-class management team with proven retail expertise. The Company needs fresh thinking, a new strategy and a financing solution that both addresses short-term liquidity requirements and secures DIA's long-term future. 

Over the last few years, DIA has missed relevant customer trends, underperformed against its competitors and lost market share, particularly in the Spanish market. The company is currently in structural decline and its brand has been tarnished. More recently, DIA in October 2018 announced a restatement of its 2017 accounts and a significant profit warning for 2018. These developments, combined with DIA's high level of debt, have constrained the Company's ability to operate effectively day-to-day and invest in its future.

As a consequence, DIA has suffered seven credit ratings downgrades from BBB- to CCC+ since October 2018. The Company's share price has fallen by 89.3% over the past 12 months.

L1 Retail believes that the indicative €600m recapitalisation plan currently being contemplated by the Company does not address the fundamental strategic, leadership and capital structure challenges that DIA is facing and exposes DIA shareholders to the risk of significant dilution without a viable long-term capital structure.

L1 Retail Rescue Plan – MAKE DIA A CHAMPION

Under L1 Retail leadership, DIA can re-emerge as a leading player in food retail in Spain, Brazil, Argentina and Portugal for the benefit of all stakeholders including customers, employees, franchisees, suppliers, lenders and shareholders.

1. The voluntary tender offer price of €0.67 offered by L1 Retail represents:

• a premium of approximately 56.1% to the closing market price on 4 February 2019 (€0.43 per share);
• a premium of approximately 52.5% to the volume-weighted average price (VWAP) of the Company's shares for the 1-month period ended on 4 February 2019 (€0.44 per share); and
• a premium of approximately 19.4% to the volume-weighted average price (VWAP) of the Company's shares for the 3-month period ended on 4 February 2019 (€0.56 per share).

The voluntary tender offer, which needs to be authorised by the CNMV, is conditional upon acceptance by shareholders (other than L1 Retail) holding at least 35.5% of DIA's shares and relevant anti-trust approvals. It is also conditional on no equity being issued before the end of the completion of the VTO.

2. L1 Retail is committed to supporting a capital increase of €500m, following the completion of the VTO, to achieve a viable long-term capital structure for DIA. L1 Retail would commit to subscribe its pro-rata share of the capital increase and to underwrite the remaining balance.  Execution and underwriting of the capital increase would be conditional on, and would only take place after, the voluntary tender offer becoming unconditional in accordance with its terms, and on reaching an agreement with DIA's lending banks regarding a viable, long-term capital structure for DIA.

3. L1 Retail has a comprehensive six-pillar transformation plan which includes: a new commercial value proposition; re-set pricing and promotions; an appropriate store network strategy; recruitment of new leadership and development of existing talent; improvement in retail operations execution; and investment in brand and marketing. The execution of the plan requires leadership, governance and a viable long-term capital structure, which can support the turnaround of the Company over the next 5 years. L1 Retail will share more details of its plans in the tender offer prospectus, which will be published in due course.

L1 Retail is willing to work with the Board of DIA, its lending banks and other stakeholders on the implementation of this comprehensive rescue plan.

Stephan DuCharme, L1 Retail's Managing Partner, said: "DIA is facing an uncertain future. This rescue plan not only addresses DIA's capital structure requirements but provides a base for DIA to re-emerge as a champion of Spanish food retail. L1 Retail is fully committed to the Spanish market and we believe our tender offer provides an attractive premium to shareholders. The L1 Retail rescue plan secures a long-term future for all stakeholders including customers, employees, franchisees, suppliers and lenders. Jointly we can achieve this turnaround, which will require leadership, hard work, expertise, commitment and patience."

About LetterOne

L1 Retail is the retail division of LetterOne, an international investment business led by successful entrepreneurs and former CEOs and international businesspeople with best-in-class governance. It is a long-term active investor, investing its own capital in companies where it believes its sector experience and strategic and geographic expertise will improve performance and create value for all partners and stakeholders. LetterOne is chaired by Lord Davies of Abersoch, the former UK Minister of State for Trade, Investment and Small Business.

L1 Retail brings with it world-class retailing and transformation skills and has the requisite credentials to successfully implement the turnaround plan. The L1 Retail team includes Stephan DuCharme, who is the former CEO and current Chairman of Russian food retailer X5 Retail Group and oversaw a period of strong growth from 3,800 stores to over 14,000 stores today. The team also includes Sergio Dias, the former Deputy CFO of Group Carrefour. Stephan and Sergio are supported by a highly experienced Advisory Board, which includes Karl-Heinz Holland, the former CEO of LIDL, who brings unparalleled retailing leadership knowledge and experience.

L1 Retail's other retail investments include Holland & Barrett which it acquired for £1.77bn. Holland & Barrett is Europe's largest health and wellness retailer, with over 1,000 owned stores, and over 500 franchise or store-in-stores in 20 Countries globally. The transaction was funded with equity from LetterOne and £900m of senior debt financing which was underwritten and then successfully syndicated by Citigroup, HSBC, UBS, Société Générale and Barclays.

There will be a call for analysts and investors at 13.30 CET. The presentation can be found on the CNMV website at www.cnmv.es. Dial in number: +34-910-956778; Participant pin: 528628.

Enquiries

For further information, please contact:

Spanish media:
Aida Prados
+34-636-424-483
[email protected]

Juan Frances
+34-679-962-382
[email protected] 

International media:
Stuart Bruseth
[email protected]
LetterOne
+44-203-815-3385

Billy Clegg / Jennifer Renwick
Camarco
[email protected]
+44-203-757-4890

SOURCE LetterOne

Related Links

http://www.cnmv.es

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