On the table are already the cards with which the future of Dia is played. On one side of the table, those on the board of administration captained by Borja de la Cierva. On the other, those of Mikhail Fridman and his Letterone background, the highest shareholder, with 29.1% of the shares.
Two sides and two plans
The current managers, send with a reduction and capital increase of 600 million secured by Morgan Stanley, which would follow a four-year plan. Their ace in the sleeve is that, at the moment, they have the support of the banks.
Letterone, on the other hand, wants to take over the entire deck with a cracking in the form of opa for 70.9% that does not control, to later expand the capital, agree with the banks and apply a reflote plan. The trick is played at the next meeting of shareholders, on March 19 or 20, depending on whether it takes place in the first or second call. These are the accounts that must be used to secure their tricks, if they do not choose to shake hands and gather their letters to go together to the rescue of the supermarket chain.
The council's plan: a key board
He has it complicated. Although in theory it represents 70% of the shares, since Letterone left by its own will of the advice, its plans have before a voluminous obstacle, the Russian giant, that by itself counts on near a third of the votes. To get your capital increase going, you need the approval of the shareholders. According to Dia's bylaws, the meeting can be held on first call if "at least 25% of the subscribed capital with voting rights" is present. If Fridman comes, then, it could be celebrated on March 19.
However, to carry out a capital increase, at least one-half of the shareholders must be present or represented at the first call. Once this requirement has been met, you must vote in favor of half plus one ("absolute majority") of those present.
If it is a second call, to discuss the extension, it is necessary that at least 25% of the shares attend the meeting. If between 25% and 50% of the capital is present, in order to approve an extension, a favorable vote of two thirds of those present or represented is necessary. If 50% of the capital is exceeded, the absolute majority of those present or represented will suffice.
In the last shareholder meetings, the average of shareholders present or represented has hovered around 60%. With that quorum, Fridman would have practically in hand to stop the plans of the council, since his vote already would touch the absolute majority necessary to derail the enlargement. Account, also, a priori, with Goldman Sachs. This bank holds 5% of the shares and is the banking arm of Fridman, which would ensure its capital increase if it moves forward with its takeover bid.
The current managers need, therefore, that this 60% of quorum and that everyone who is not Fridman vote in favor of its expansion. An extension that, in addition, is accompanied by a prior reduction, so that shareholders not interested in backing it would suffer a strong dilution of their shares. Complicated. And, in the documentation of the board they affirm that, if the extension does not come out, they will immediately request the bankruptcy.
The assault plan: a low cost bid
The fact of having a shareholding package close to a third of the capital gives more aces up its sleeve. Any meeting of shareholders in which at least 58% of the shares are not present or represented automatically automatically allows the council's plans to be overturned. In the event that 100% of the shareholders attend the meeting, it would be enough to add 21% more for their side.
Stopping the expansion is a sine qua non condition for Fridman, since its takeover, which will finally be submitted later this week, is conditioned on the fact that no new shares are issued until it is resolved. In addition to the fact that no shares are issued, Letterone's bid is conditioned on the fact that half of 70.9% of the capital it does not control goes to. That is, you must add 35.45%. If you manage to get more than 90% of the total, your plan is to get the company out of the Exchange.
Fridman's takeover, on the other hand, must be adjusted to a deadline. If you present it this week, the CNMV has seven working days to admit it for processing and 20 to accept or deny it. However, this term starts again each time the CNMV requires documentation that it deems necessary, so the process can be extended. And that is if there is no other Opa or Letterone decides to increase the price ...
Once the success of the OPA has been achieved, Fridman intends to increase capital by 500 million, which I would have no problem doing, since I would have at least 65% of the shares. From there, a business plan to five years to refloat the chain. As for financing, the fund is in talks with analysts and banks to detail their plans, but has not yet reported agreements. The deadlines tighten because Dia has to face a maturity of bonds in July for 305 million.
In this scenario, the current board, if it obtains the shareholders' approval for its extension, has up to one year to carry it out, according to the documentation attached to the call of the meeting. That is to say, it can achieve its objective and at the same time it would take time to reach an agreement with Fridman that supposes that both parties go hand in hand to rescue the company. Sources close to the council see that possibility as the ideal for a group that goes through its lowest moments.