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Dollarama to Acquire 50.1% Interest in Latin American Value Retailer Dollarcity
Thursday 11 July 2019

11 July 2019 - Canada-based retailer Dollarama Inc. (TSX: DOL) has entered into a definitive stock purchase agreement to acquire a 50.1% interest in Latin American value retailer Dollarcity, the company said.
Dollarama will pay an estimated purchase price in the range of USD 85 to USD 95m, including an upfront payment of USD 40m at closing.
The purchase price is based on a five times multiple of Dollarcity's EBITDA, minus net debt and subject to customary adjustments, and will be settled in cash using available free cash flows.
As at March 31, 2019, Dollarcity operated a total of 180 stores, with 44 in El Salvador, 54 in Guatemala and 82 in Colombia. Dollarcity's growth plan to 2029 is to reach a target of up to 600 stores within its three existing countries of operation, with the majority of store growth to be focused in Colombia.
Dollarcity's growth target for the calendar year 2019 is 40 to 50 net new stores. In the first quarter of 2019, Dollarcity had already opened 11 net new stores.
In February 2013, Dollarama entered into a commercial agreement to share its business expertise and provide sourcing services to Dollarcity, through a wholly-owned subsidiary, Dollarama International Inc.
This agreement included the option for Dollarama to acquire a 50.1% interest in Dollarcity as of the beginning of the seventh year of the partnership. The countries covered by the agreement are Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Peru.
In 2016, the agreement was amended to postpone the opening of the call option window from February 2019 to February 2020, as well as the relevant reference financial period for the purposes of the purchase price calculation, in order to provide the parties with more time to test the value retail concept in Colombia and to take into account the additional investments required to be made by Dollarcity to enter this market.
Dollarama and Dollarcity have now mutually agreed to accelerate the call option while maintaining, for the purposes of purchase price calculation, the formula agreed upon in 2013 and the reference financial period agreed upon in the 2016 amendment.
The transaction, which is subject to customary closing conditions, is expected to close in August 2019. Dollarama will account for its investment in Dollarcity based on the equity method.
Dollarcity stockholders will be comprised of Dollarama, with 50.1% ownership, and the Dollarcity founding group, with 49.9% ownership. As a result, certain strategic and operational decisions will be subject to 100% stockholder approval.
These include, but are not limited to, decisions related to capital structure, nature of the business, merger and acquisition activities, executive officer appointments, approval of annual budget and business plan, and entry into new countries.
The Dollarcity board of directors will be composed of five directors, three Dollarama representatives and two representatives of the Dollarcity founding group.
Dollarama is a Canadian value retailer offering an assortment of consumable products, general merchandise and seasonal items both in-store and online.
Its 1,236 locations across Canada provide customers with value in convenient locations, including metropolitan areas, mid-sized cities and small towns.
Details
Date Published: 11/07/2019
Target: Dollarcity/51% stake
Country: Colombia
Deal Size: 95m (USD)
Sector: Wholesale/Retail
Type: LBO
Financing: Cash
Status: Agreed
Vendor:
Buyer: Dollarama
Comment:


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