September 28, 2020

DuCharme: the paladin of the Russian oligarch in his assault on Dia | Economy

DuCharme: the paladin of the Russian oligarch in his assault on Dia | Economy



Although the commotion over the Dia crisis and the struggle for control of the supermarket chain between the current board of directors and the Letterone fund, the main shareholder, is remarkable, Stephan DuCharme, transmits tranquility. Smiles, jokes and unhurriedly but without pauses the plans that L1 Retail, the paw of Letterone dedicated to the distribution, has for the battered company, which lost 352 million euros in 2018 and is immersed in the cause of dissolution with 166 million negative equity. If the battle for Dia is a poker game, DuCharme exhibits the calm gesture of the one who knows that he has a good hand, perhaps the one that gives 29% of the shares. Or it can also be that of the experienced player.

Because DuCharme (Addis Ababa, Ethiopia, 1964) is not new in these conflicts. A graduate in Political and Economic Sciences from the University of Berkeley (California) and an MBA, he was a banker for four years at Salomon Brothers (1987-91), but his fate was much farther east. In 1992, he was assigned to the Moscow office of the European Bank for Reconstruction and Development, an institution created to support ex-communist countries. It was there where came into contact with Mijail Fridman, one of those Russian oligarchs who amassed fabulous fortunes on the rubble of the collapse of communism. For him he started working in 1997 and with it he continues two decades later, after going through several destinations in the vast conglomerate of which today he is one of the richest men in Russia, whose empire ranges from supermarkets to oil, banking or telecommunications

Already in 2008, he joined the board of X5 Retail, a supermarket chain which is currently the leader in Russia, with more than 14,000 locations. In 2012, she took over as CEO, a position she held until the end of 2015, when she became non-executive chairman. In those three years, the chain went from billing 6,800 million euros to 11,700, increasing the profit by 77%, to 232 million, and from 3,000 to 7,000 establishments of different formats, from the convenience store to the hypermarket. It is true that X5 belongs to L1 Retail and this, in turn, to the Fridman conglomerate, which, unlike other oligarchs, has managed to maintain the favor of the Government of Vladimir Putin. Everything is usually easier when you have the tail wind of power.

Although, says Letterone, that growth of X5 was 80% organic, DuCharme does not disdain acquisitions. In June 2017, L1 Retail, with DuCharme as the maximum responsible, paid 2,200 million euros for the British Holland and Barrett, a chain with more than 1,300 stores in several countries, especially the United Kingdom, specializing in food supplements and nutritional products. It was his first purchase outside of Russia. The next step was Dia, the following month. On July 27, 2017, L1 Retail entered the capital of Dia becoming 10% for just over 320 million euros. At the beginning of 2018, participation already exceeded 25%, after investing another 400 million. According to DuCharme, who joined Dia's board in April 2018, they did not imagine that little more than a year later the company would be in tatters. "We have lost 90% of our investment", laments DuCharme.

However, there is no harm that does not come, says the saying, and the crash of the Stock Market as of October last year gives Letterone the opportunity to take over the rest of the supermarket chain for less than 300 million through a voluntary takeover. "In that situation, others would have left. But we wonder if the hypothesis of investing in Dia was still valid. Even after losing 700 million, we think so, "DuCharme justifies the capital increase of 500 million raised to rescue the company.

Decisive meeting

Yes, not at any price. Although he insists that "there is no war" with the current council of the company, captained by Borja de la Cierva after the dismissals of Ricardo Currás (August) and Antonio Coto (December), DuCharme, who says he is willing to agree before the shareholders' meeting of March 20, is not willing to give in one aspect. "We will put another 500 million in Dia, but only if we go in the driver's seat. We can not give that money to the same group of people that we trust those 700 million, "ditch. In his opinion, the collapse of Dia is due to a failure of corporate governance, of the council. When he is reminded that he and two of his collaborators were part of Dia's council since April 2018, he defends that those three posts gave them a voice, "but not the ability to make decisions." Hence the unalterable sequence of his salvage plan for Dia: first the takeover, to have control; then, the capital increase, conditional on an agreement with the banks, to which Dia owes 900 million.

Before arriving there, we must save one last obstacle, the shareholders' meeting of March 20, where they will choose their plan or that of the council. True to a strategy of listening to the foundations that it has already launched in X5, DuCharme has been working with shareholders and suppliers, as did De la Cierva's team. With 29% of the titles, he is convinced that he will be successful. It will be then when he sits down to talk to the banks, to whom he asks to defer the debt payments until 2023 in order to dedicate the maximum amount of money to the reflation of the company. "Our plan requires four or five years of patience," he claims.

20 years of friendship

"I met Mikhail in 1995. He was a young businessman who, with others, had a distribution chain of 11 stores that they wanted to convert into the Russian Walmart." This is how DuCharme relates the beginning of his relationship with the tycoon Fridman, who went to the EBRD in search of financing. The analysis he did on the chain "gave us more than enough comfort" to give him the go-ahead, he says. Since then, he affirms that his "respect for the tycoon as a person and as an entrepreneur has only increased". About the report of the Spanish police that considers Fridman leader of a criminal organization, says to ignore it, but it reduces credibility. "The accusations are false and defamatory," ditch.

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