17 April 2019
LetterOne Extends Acceptance Period for DIA VTO until 30 April 2019
Madrid, 17 April 2019: L1R Invest1 Holdings S.a r.l. (“LetterOne”), owner of 29% of Distribuidora Internacional de Alimentación, S.A. (“DIA” or the “Company”), today announces that it has extended the acceptance period for its voluntary tender offer (the “VTO”) from 23 April to 30 April.
LetterOne has taken this decision so that DIA shareholders have further time to make a decision on the acceptance or not of the VTO to receive €0.67 in cash per share after the finalisation of the Easter break, in order to maximise the level of acceptance of the VTO. LetterOne encourages all shareholders to tender their shares in the VTO.
The Board of DIA have highlighted a significant deterioration in the business
LetterOne welcomes the Board’s favourable opinion in respect of the VTO, published on 9 April 2019, which recognised the VTO as the best existing alternative for all stakeholders. In its report, the Board indicated a significant deterioration in the performance of the business in Q1, with negative like for like growth of (4.3)%, reflecting an acceleration of the negative business trend the Company has been facing. Furthermore, the Board highlighted the like for like sales have been in progressive decline during Q1. The Board did not disclose further details on the Company’s financial performance in Q1.
The deterioration in the performance of the business highlights the significant risk to all DIA stakeholders, including shareholders, of the viability of the business without access to further capital. Given this severe deterioration in performance and the resulting constraints on liquidity, LetterOne has requested more flexibility from DIA’s lending banks, including an increase in new super senior facilities of €380m compared with €170m previously sought. LetterOne continues to engage with the Company’s lending banks to seek to reach an agreement on a viable long-term capital structure, which is not a condition to the VTO closing and shareholders receiving €0.67 per share.
There are significant risks for all shareholders (including LetterOne) if the VTO minimum acceptance level is not met.
In the event that the VTO minimum acceptance level is not met, the Board of DIA may be obliged to carry out severe measures in relation to its financial situation, such as, amongst others, the declaration of insolvency or the capitalisation of the bank debt by the lending banks.
Shareholders that decide not to tender their shares in the VTO increase the risk that the minimum acceptance condition of the VTO will not be satisfied and the €0.67 per share cash offer will no longer be available to shareholders. As indicated in the prospectus of the VTO, LetterOne will not waive this condition, and, consequently, if the minimum acceptance level condition is not met, the VTO will expire.
Shareholders who decide not to tender in the VTO and want to retain their shares will share significant execution risk with LetterOne
Even if the VTO minimum acceptance level will be met, shareholders who decide not to tender their shares because they wish to remain shareholders of the Company are reminded that LetterOne’s capital increase, which is required to ensure the future viability of the Company, also depends upon the other conditions to the capital increase being met, including an agreement being reached the Company’s lending banks in relation to a viable long-term capital structure of the Company. There can be no assurances that such an agreement with the lending banks can be reached and that the LetterOne capital increase will occur.
LetterOne encourages shareholders to consider the risk that the Company’s share price even following a VTO with a positive result may be materially lower than the €0.67 in cash consideration offered to those shareholders who tender in the VTO. Shareholders are reminded that any LetterOne capital increase would occur at a discount to the trading price post VTO, resulting in significant dilution to shareholders who do not participate with a new cash investment in the capital increase.
Lastly, any remaining shareholders will share in the significant execution risk of a turnaround plan with no guarantee of success and which will require several years to potentially yield positive results. LetterOne makes no commitment to maintain the former dividend policy of DIA after settlement of the VTO and does not believe it will be reasonable for DIA to distribute dividends in the next few years.
LetterOne encourages all shareholders to tender their shares in the VTO at €0.67 per share.
Stephan DuCharme, Managing Partner of L1 Retail, commented:
“DIA’s current situation is very challenging, with sales declines accelerating on a like-for-like basis. Without a capital injection and change in governance and leadership to deliver a demanding transformation, led by LetterOne, the viability of the Company is in question.
“DIA’s Board has made it clear to shareholders that in the event that the VTO is not successful, the Board may be left with no alternative but to declare insolvency or undertake a debt for equity swap leading to further significant shareholder losses. We therefore encourage all shareholders to tender their shares in the VTO and receive €0.67 per share.”
For further information on the VTO, please refer to the prospectus of the VTO and its ancillary documentation as authorised by the CNMV.