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December 16, 2013

SPAIN: Dia admits El Arbol talks, no deal reached

Spanish discounter Dia has revealed it has held initial talks to buy local supermarket chain Grupo El Arbol - but no deal has been reached.

By Dean Best

Spanish discounter Dia has revealed it has held initial talks to buy local supermarket chain Grupo El Árbol – but no deal has been reached.

After reports in Spain said Dia was looking to buy El Árbol in a deal worth between EUR100m and EUR200m, the retailer admitted it had had discussions over a possible transaction.

“In connection with the information appeared today in different media regarding the potential acquisition of Grupo El Árbol, the company informs that, as part of its ongoing analysis of growth opportunities, it has maintained preliminary conversations in relation with its interest in a potential acquisition of Grupo El Árbol,” Dia said in a statement to the Spanish stock exchange.

“As of today, such conversations have concluded with no agreement or undertaking having been reached.”

El Árbol has over 450 supermarket and cash-and-carry stores in Spain. The company, which counts Spanish banks and employees among its owners, generated sales of EUR848m in 2012, an increase of 1.5% on 2011. EBITDA stood at EUR21.8m, down 0.9% on the year before.

Kepler Cheuvreux analyst Inigo Egusquiza, writing after the reports of talks between Dia and El Árbol emerged, said a deal would be “moderately good news” for the discounter.

“The group would consolidate its third position in Spain by acquiring El Arbol (number 14), and considering the Eroski group’s financial troubles, becoming number three, with sales of more than EUR5bn, just behind Spanish Mercadona and French Carrefour,” Egusquiza wrote. “The acquisition would also be in line with Dia’s strategy of growing in Spain through the acquisition of companies facing financial troubles without a strong shareholder.”

However, the analyst added: “That said, if the acquisition of El Arbol takes place, Dia becomes a more mature retailer increasing exposure to Spain (vs. emerging markets), not the best thing from a stock market perspective.”

Shares in Dia were up 3.48% at EUR6.36 at 12:59 GMT.

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