Russian buyout of Spain supermarket chain Dia favoured

Shareholders in struggling Spanish supermarket chain Dia on Wednesday rejected a capital increase proposed by the company’s management, paving the way for a takeover bid by an investment fund owned by Russian tycoon Mikhail Fridman.

Dia’s board had proposed the 600 million-euro ($690 million) capital increase as part of a restructuring plan, but shareholders meeting in Madrid instead approved a 500 million-euro capital increase put forward by Fridman’s LetterOne investment vehicle.

Luxembourg-based LetterOne, the discount supermarket chain’s biggest shareholder with a 29 percent stake, had vowed to drop an offer announced last month to buy all of Dia’s remaining shares if its proposed capital hike was not approved by shareholders.

LetterOne is offering 0.67 euro per Dia share. The company’s shares have shed nearly 90 percent of their value since the beginning of 2018.

Dia, which is present in Brazil, Argentina and Portugal in addition to Spain, posted a net loss of 353 million euros in 2018.

It blamed the poor results on a reduction in margins in Spain, where it was forced to reduce prices in the face of stiff competition, and hyperinflation in Argentina where it has 16 percent of its stores.

Dia’s chief executive Borja de la Cierva acknowledged at the meeting that the company had since 2016 made mistakes such as offering “excessive discounts” and had often run out of stock, which caused the company to lose market share to its main rivals, Germany’s Lidl and Spain’s Mercadona.

The group, which last year dropped out of Spain’s Ibex35 index of most traded shares, has debts of around 1.45 billion euros.

A LetterOne representative at the shareholders meeting, Stephan Ducharme, promised a “full rescue plan” for the company.