After meeting on Tuesday opa than the Letterone background has launched over 70.9% that does not control the supermarket chain Dia, the board of directors of the company, in which the fund is not present, meets today to analyze the new situation. For the moment, the board seems determined to continue with its plans, that is, present the results of 2018, shareholders meeting in March and capital increase in April, independently of Letterone's plans, which must respect the legal deadlines to be marked by the CNMV. The first step was taken today when announcing, in a Relevant event submitted to the CNMV, which will present results this Friday.
Dia was due to submit the 2018 accounts before February 15 and it was expected that the deadlines would be exhausted. However, he has decided to advance the presentation to this Friday. He thus takes the first step of his road map, which would later be presented by the strategic plan to revive the company – which includes, among other things, the closing of stores, the sale of Clarel perfumeries and the cash & carry (for wholesalers) Max Discount or enhance the white label- and convene the shareholders' meeting to obtain approval for a capital increase for 600 million.
The terms of the board of directors clash with the plans of the group's main shareholder, the Letterone fund of the Russian tycoon Mikhail Fridman. The fund announced yesterday a "voluntary" bid – a formula that prevents it from having to offer an equitable price of 3.73 euros per share – on 70.9% of the day it does not already have, at a price of 0.67 euros per share His plan also goes through a capital increase of 500 million, conditioned to the success of the takeover (achieve at least half of that 70.9%) and reach an agreement with the creditor bank on the debt of at least 900 million that the group has with the banks – another 900 million has in bonds, one of whose emissions, of 300 million, expires in July-. In addition, it also announced an outline of a "rescue plan" for Dia to once again become a "leading player in the retail food distribution sector in Spain". The plan includes readjusting prices, reviewing the store network and kicking out the current council – "recruit new leadership," he said yesterday in the note announcing the takeover.
The problem for the Letterone background are the deadlines. Yesterday announced the OPA, which formally requested before 15 days. From there, the CNMV has to authorize it, for which it has a term of 20 days, if it does not make any documentation requirement. In addition, another investor could appear to raise the bid, which would delay the terms. That clashes with the shareholders' meeting, which will have to vote the 600 million increase and the banking conditions the refinancing to that extension. On the other hand, Fridman's bid is conditioned "do not increase capital before the voluntary takeover".
The creditor bank, therefore, has two similar plans on the table with different plans. Sources from one of the creditor banks affirm that it is positive that there are actors, Letterone or the current council with its expansion – willing to put money in the company. Meanwhile, they refer to what the shareholders decide, that they will have to choose between the takeover bid, the current board plan or, if it occurs, the appearance of another investor willing to raise the bid.
S & P downgrades the note
Neither of the two plans convinces the S & P Global rating agency, which has lowered one step more than the note of the supermarket chain, until leaving it in CCC, which assumes that it considers the company to be "vulnerable to non-payment and depends of favorable business, financial or economic conditions to meet its financial commitments. " In the opinion of the agency, both the council's plan and Fridman's plan "entail significant execution risks and uncertain results."
The agency also warns of "short-term refinancing risks of Dia, with debt maturities of around 1,200 million euros in the next six months." Likewise, he sees "uncertainty and execution risks in the group's plans to achieve a sustainable capital structure, through a combination of capital increase and a new long-term refinancing with banks". Although there are two rescue plans on the table, S & P says it can not "rule out short-term liquidity problems", stock market shifts or a capital restructuring in the next 12 months.
He predicts that Dia will continue to face difficulties in 2019, that EBITDA will be reduced by 40% in the results of 2018 and that net debt will increase between 370 and 400 million (from the 1,422 that the chain published in the third quarter results). He considers necessary a "deep transformation to gain competitiveness and restore margins," but believes that this transformation entails risks and will incur expenses that will add to the group's profitability.
It is the fourth time since mid-October that S & P Global downgraded the supermarket chain's rating, after doing it the last time just before the company signed the bank debt refinancing agreement for 896 million euros and waiting to carry out the capital increase of the council for a minimum amount of 600 million euros, which ensures Morgan Stanle