The minority shareholders of the Dia supermarket group return to the charge against the board of directors. Specifically, the Portuguese fund Western Gate, owner of 2.18% of the company's shares, has sent a letter to the board urging it to explain what measures it will take to increase the liquidity, transparency and market value of the company. company.
The fund is especially critical in its letter of the fact that those responsible for the supermarket chain did not take into account its proposal to appoint a new director, following the resignation of former president Stephan DuCharme. The family office proposed the appointment of Luis Amaral as an independent director, so that he would represent the interests of the minorities and "bring a certain balance to the board," the letter explains. The board rejected the appointment, arguing that Dia "already had a balanced board", and elected a proprietary director, Alberto Gavazzi, proposed by its majority shareholder, the Letterone fund, which maintains 77% of the capital. Letterone is linked to Russian tycoon Mikhail Fridman, now under EU sanctions on Russia.
For Western Gate, this unjustified rejection shows "that Dia's board of directors has no intention of reinforcing transparency or taking into account the interests of minority shareholders; nor, finally, of improving the skills and experience of the advice". "As Western Gate recognized at the time, Letterone, as a majority shareholder, has the right to appoint some proprietary directors, which does not give this company the right to ignore and disparage minority shareholders, particularly those who have supported to Dia resorting to two capital increases", the fund expresses itself harshly.
The Portuguese is also critical of the chain's stock market listing, ensuring that, although "it should be noted that the operational evolution of the company has improved constantly since 2021", since the last capital increase carried out in the summer of 2021 , "the share price has fallen 35%, which highlights the company's poor governance and its inability to increase its market value," they say. "Since Letterone has managed Dia's board, the company has suffered a massive profit warning, a takeover bid at a discount to the stock market price and an even greater discount to the book value, and two extremely dilutive capital increases that were two attempts at take the company private,” he says. "In each capital increase, we shareholders have had to double the capital we already had in Dia or we ran the risk of not recovering our investment. In our view, Letterone has tried to delist Dia on three occasions at the expense of squeezing to minority shareholders and reduce the value of their shares to practically nothing," the fund explains in its letter.
Thus, Western Gate reports that Dia's shares are trading at a multiple of six times EBITDA while the average European food chain is trading at a valuation between 9.3 and 11.8 times, which implies that the chain is "clearly undervalued." "Western Gate and other shareholders have supported Dia throughout these events because we believe in the value of the company. However, we do not see efforts being made to increase this value."
"Dia is improving operationally. However, the share price and market value do not reflect this improvement. For Western Gate, this stems from a lack of transparency and the strategy driven by the majority shareholder Letterone. Western Gate believes that Letterone is not interested in the company's market value corresponding to operational improvements, but, on the other hand, it does seem interested in maintaining a closed board without external contributions," they say.
The letter concludes by asking the board to "take into account their concerns and take necessary steps to correct these governance deficiencies and restore investor confidence in Dia's future projects."
