The shareholders of the supermarket chain Dia gave their support to the LetterOne fund on Wednesday, property of the Russian businessman Mikhail Fridman, in the battle for control of the company with the current board of directors. The poor attendance at the shareholders' meeting, barely 54.3%, served Letterone as a support for their proposals, thanks to holding 29% of the shares. At the time, his vote rejected the plans of the council, which remains in a delicate situation. Fridman wins the first battle, leaves the company in a strange situation (with the current council discredited) and the war for full control is still plagued by uncertainties.
The shareholders meeting, which was predicted to be crucial, finally had less emotion than promised. When 60% of the shareholders did not attend, Letterone's vote was enough to approve or reject any item on the agenda and it was clear that the council's plan to get the company out of the quagmire – 600 million capital increase and plan rescue-had no chance to prosper.
That's how it went. After the question time, the secretary, Ramiro Rivera, read that the shareholders had given their support to point 6.3 of the agenda, which contained the capital increase of Letterone, for 500 million and conditioned to the success of the OPA presented in February to 0.67 euros per share and to reach an agreement with the banks on the debt of the distribution group. At the time, point 6.1 was rejected, that of the expansion of the council by 600 million. The intervention of the CEO, Borja de la Cierva, focused on explaining the crisis of the company – "the last 12 months have been the most difficult and convulsive period of the company since its foundation", he said – and in defending its plan to remove the company from the quagmire: in a situation of technical bankruptcy after presenting losses of 352 million in 2018 and with a debt of 1,452 million euros.
After the meeting, L1 Retail, the retail division of Letterone, expressed its "satisfaction" with the outcome of the meeting and announced that it will work "intensively" so that the CNMV approve the takeover as soon as possible, which in turn must be accepted by the Board. less half of the 71% of the capital that Fridman does not have. Without a takeover, there will be no capital increase, since L1 flatly refuses to put one more Euro in Dia while it does not have full control of the company, that is, until it reaches its takeover bid.
According to what was heard yesterday at the meeting, you will still have to work to win the support of the minority holders. The shareholder José Antonio del Barrio reproached the "hustler" Fridman "do business at the expense of minority." "Go to Russia, fuck!" He snapped at the question time. He also had for the council, which he considered "responsible for the ruin of our investment" and reproached him "the little embarrassment" of asking for more money for its expansion. "We are fools, but not assholes," he summarized. Other shareholders also opposed the takeover bid. The percentage of support for Fridman's plans was not known, which could be indicative of the selling spirit of the minority shareholders, vital for the takeover, since they account for more than 57% of the shares.
Agreement with the bank
Letterone also announced that it would work with the board to guarantee Dia's long-term viability and that it will continue to seek an agreement with the creditor banks to achieve "a viable long-term capital structure", that is, on the debts of the company. What does Fridman ask the banks? That they agree to postpone any debt maturity until 2023. It should not be difficult: the board has already he had achieved that oxygen from the bench one day before the meeting. That agreement, although formally subject to the approval of the council's plan, should serve as the basis for Letterone's negotiations with the dozen creditor entities, which actually began months ago.
In fact, the council alluded in a note to the agreement with the bank that L1 should "reach (or ratify)", which is an indication that a negotiated solution is sought between the three parties -Letterone, council and banking- to the situation in which the company is. In negative equity, you have two months to recover the equity balance before going into bankruptcy – if a creditor does not ask for it on your own. The council, which met after the meeting, rules out asking for it and blowing up the situation. On the contrary, he affirmed that he will continue working with L1 and with the banks to "fulfill the requirements that are his responsibility" and to keep the company going.
But the truth is that this Wednesday was discredited. As proof, the appointment of Miguel Ángel Iglesias, proposed by the board, as an executive director was rejected at the meeting. Not so the Jaime García Legaz, former Secretary of State and who many see as future non-executive president of the company. The renovation of KPMG as auditor was also rejected, after 20 years supervising the chain's accounts. EY, who was already a co-auditor of the last accounts, will be the owner from now on.