07 March 2019

L1 Retail's provides superior capital increase proposal at Dia's AGM

Shareholders should reject the €600m recapitalisation plan proposed by DIA, and support the €500m capital increase put forward by L1 Retail


Madrid, 21 February 2019: L1 Retail, an international investment business with proven world-class retailing and retail transformation expertise, and owner of 29% of Distribuidora Internacional de Alimentación S.A. (“DIA” or the “Company”), the Spanish food retailer, notes the Notice of Annual General Meeting (“AGM”) announced by DIA on 17 February 2019 and today announces that it has requisitioned a resolution to be proposed at DIA’s AGM, in relation to an alternative €500m capital increase proposal.


At the AGM, which is expected to be held on second call on 20 March 2019, L1 Retail urges fellow shareholders to:

1. Vote AGAINST resolution numbers 6.1 and 6.2 – the potential dilutive recapitalisation plan proposed by the DIA Board. If these resolutions are passed and shares are issued before L1 Retail’s voluntary tender offer (“VTO”) is completed, then the VTO, and the opportunity for shareholders to sell shares at the premium valuation of €0.67 per share, falls away. L1 Retail will be voting AGAINST these resolutions.


2. Vote AGAINST resolution number 5.2 – the approval to reduce the share capital of the Company by means of the reduction of the nominal value of the shares to €0.01. This share capital reduction would not, in itself, remove the Company’s mandatory dissolution cause. However, a direct consequence of this resolution is that it would facilitate DIA raising €600m at a price as low as €0.01 per share, which would be significantly more dilutive for shareholders than the €500m capital increase proposed by L1 Retail, which will be executed at no less than €0.10 per share. L1 Retail will be voting AGAINST this resolution.


3. Vote FOR the new resolution to be added by the Company in its revised agenda at L1 Retail’s request – a €500m capital increase proposal put forward by L1 Retail to be implemented, and fully underwritten, following L1 Retail obtaining control and the Company reaching an agreement with its lending banks in relation to a viable long-term capital structure.


The Board’s recapitalisation plan does not address the fundamental strategic, leadership and capital structure challenges that DIA is facing.


L1 Retail’s VTO allows shareholders to avoid the potentially severe dilution from the capital raise proposed by the Board and the execution risk associated with a complex five-year turnaround. This voluntary tender offer is however conditional on no equity being issued before the completion of the VTO.


The purpose of L1 Retail’s combination of a VTO and a subsequent €500m rights issue is to achieve a viable long-term capital structure for the Company and grant it the necessary headroom and strategic flexibility to deliver a comprehensive turnaround over 5 years.


Stephan DuCharme, L1 Retail’s Managing Partner, commented:

“The results issued on 8 February showed the depth of the short and long term challenges facing DIA. The Board’s plan does not address the governance issues that have led to the current situation the Company finds itself in, which is critical to deliver a turnaround of the scale that is required here.

DIA urgently requires a change in leadership to deliver what will be a challenging transformation. DIA needs proven turnaround skills and a change in culture, led from the top, which centres on a sense of urgency to deliver the best value proposition for DIA’s customers.

The Board’s proposed €600m capital increase is creditor friendly, at the expense of shareholders – facilitating repayment of the existing lenders without providing the company with the capital and liquidity needed for its turnaround.

Shareholders have a choice to make. They can support a plan proposed by the DIA Board that involves no changes in governance and a highly dilutive capital increase, followed by a long and challenging turnaround. Or they can support the L1 Retail capital increase which addresses the governance issues, is shareholder friendly and provides the opportunity for shareholders to sell their shares at the premium valuation of €0.67 per share before any new funds are required.  If DIA’s €600m rights issue is voted through and new shares are issued, L1 Retail’s VTO will fall away.”


The Board’s Plan does not address governance issues

DIA’s deteriorating business and financial profile are the direct result of corporate governance failures. The Company was unable to successfully address the changing demands of customers and the business challenges it has been facing in recent years. In addition, DIA had accounting irregularities, which led to the restatement of the 2017 accounts and the consequent significant reduction in 2018 results. The Company’s recapitalisation plan does not include any changes to governance which will be required to achieve a turnaround of the scale required.   


The Board’s plan will maximise dilution for shareholders

The Board’s recapitalisation plan addresses the near-term requirements of DIA’s creditors whilst ignoring the long-term capital needs of the business. The Board’s plan will expose non-participating DIA shareholders to potential significant dilution without a viable long-term capital structure, as demonstrated by the Company’s announcement on 17 February 2019 that it is seeking approval to reduce the nominal value of the shares to €0.01, which will facilitate the capital raise of €600m at a more dilutive price.


L1 Retail is willing to lead the transformation in governance and culture

As the shareholder that has suffered the greatest financial loss, L1 Retail is willing to invest more capital after key changes in governance to address the significant issues facing DIA.


The Company urgently needs fresh thinking, new leadership and oversight, a new strategy and a new financial plan that both addresses short-term liquidity requirements and secures DIA’s long-term future as an effective competitor in the market place.


L1 Retail launched its VTO to provide this much needed change in leadership for the company. L1 Retail’s comprehensive five-year transformation plan will be delivered by a team with proven world-class retailing and transformation skills and the requisite credentials to successfully implement it.


The L1 Retail team includes Stephan DuCharme, who is the former CEO and current Chairman of food retailer X5 Retail Group, Karl-Heinz Holland, the former CEO of food retailer LIDL and Sergio Dias, the former Deputy CFO of food retailer Groupe Carrefour.  Stephan, Karl-Heinz and Sergio are supported by an investment team and advisory network who contribute strong turnaround, retailing, financial and leadership expertise.


L1 Retail’s capital increase and VTO are shareholder friendly

L1 Retail has developed a comprehensive plan for DIA, which will take a great deal of investment, expertise and time. The turnaround will be challenging and uncertain in its outcome, and it will take up to five years.


L1 Retail’s VTO offers shareholders certainty. It offers them an opportunity to sell their shares at a price of €0.67 per share, which represents a significant premium of 56.1% to the closing price on 4 February 2019. The VTO is solely conditional upon acceptance by shareholders (other than L1 Retail) holding at least 35.5% of DIA’s shares, no equity being issued before the completion of the VTO and customary antitrust clearances, which have already been filed. Through its VTO, which is subject to the authorization of the CNMV, L1 Retail has outlined its willingness to assume all the risks that will accompany the implementation of the five-year turnaround.


The subsequent €500m capital increase serves the interests of both shareholders and creditors in what is believed to be a balanced and fair manner, and is conditional upon an agreement with lenders to maintain their existing debt commitments and re-instate confirming/factoring lines, on a committed basis, to ensure that the business has sufficient liquidity over the period of the transformation plan and there being no prepayment of syndicated credit facilities derived from the proceeds obtained in any share capital increase.


The VTO is progressing to plan. L1 Retail filed the request for authorization of the VTO, together with the prospectus, with the CNMV earlier today and has already filed the necessary documentation with the European Commission antitrust authority and with CADE (the Administrative Council for Economic Defense), the Brazilian antitrust authority.


Further information can be found at www.makediaachampion.com




For further information, please contact:


Spanish media:

Aida Prados

+34 636 424 483



Juan Frances

+34 679 962 382



International media:

Stuart Bruseth


+44 203 815 3385



Billy Clegg / Jennifer Renwick / Nick Hennis



+44 203 757 4983 / +44 203 757 4994