Spain-based discounter DIA has received a takeover bid from investment group Letterone (L1 Retail), which is controlled by Russia-based Mikhail Fridman. Fridman established the X5 Retail Group, before growing it into the leading grocery retailer in the country.
As part of the takeover bid, L1 also announced ‘a comprehensive rescue plan’, which included a six-pillar transformation plan.
Transformation plan to take five years
L1 said it would commit €500m to a capital increase at DIA, which will put it on a firmer footing from which to build. The company admitted that turning around DIA will ‘not be… easy’ and will take five years. L1 said it believes that through its investment and turnaround programme it can ‘re-emerge as a leading player in food retail in Spain, Brazil, Argentina and Portugal’.
Turnaround built on six pillars
L1 said it would focus on what it sees as six key areas:
1. Recruit new leadership and talent: using internal and external candidates, L1 would look to ‘attract and develop talent with modern retail expertise and secure uncompromising leadership attitude’;
2. Real estate strategy: this would focus on improving sales densities and traffic through ‘active management of store locations and formats’ to ultimately ‘maximise EBITDA profitability through investment’ in its stores;
3. New commercial value proposition: the pillar probably most aligned with DIA’s existing aims, if not executed effectively in recent years. This area would see it focus on providing freshness, quality and value for money, with this supported by the development of a ‘ best-in-class private label offering’. These initiatives would be supported by building ‘new and collaborative relationships with suppliers to create long-term partnerships’;
4. Reset pricing and promotions: price investment will be key to improve its price perception with shoppers, while promotions will be used to drive traffic;
5. Retail operations execution: again focused on developing DIA’s talent, albeit with an aim to identify ‘high-performing franchisees and partners for a new and improved long-term franchisee model;
6. Investment in brand and marketing: to revamp the DIA brand and uses its new and updated stores to act as the foundations ‘for the new DIA branding statement’;
Plan to provide foundations for growth
Commenting on the takeover bid, L1 Retail’s Managing Partner, Stephan DuCharme, said: “DIA is facing an uncertain future. This rescue plan not only addresses DIA’s capital structure requirements but provides a base for DIA to re-emerge as a champion of Spanish food retail. L1 Retail is fully committed to the Spanish market and [the] rescue plan secures a long-term future for all stakeholders including customers, employees, franchisees, suppliers and lenders. Jointly we can achieve this turnaround, which will require leadership, hard work, expertise, commitment and patience.”
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