On Wednesday, December 11, a coalition of fifty minority shareholders in Distribuidora Internacional de Alimentación, S.A. (“DIA”) sent a letter to the company’s Board of Directors, urging the need for immediate strategic changes. The coalition’s letter comes after the company’s announcement regarding a new financing agreement, reverse stock split, and Investor Day event. While these moves were seen as a positive first step, the coalition expressed concerns that DIA remains significantly undervalued compared to its peers, and the lack of real progress continues to undermine shareholder confidence.
The letter begins by reflecting on Western Gate’s role as the largest minority shareholder in DIA. For several years, Western Gate has been advocating for greater attention to minority shareholder interests, improved board independence, and a broader skill set among board members. Unfortunately, the company’s Board has shown little interest in addressing these concerns, as demonstrated during DIA’s recent General Shareholders Meeting (GSM). Shareholder sentiment at the meeting echoed frustration, not only from those who spoke publicly but also from others who privately expressed their dissatisfaction.
This frustration led to the formation of a coalition of minority shareholders, united by a common vision for DIA’s future. The coalition, which includes fifty members as of the date of the letter, was formed in response to DIA’s disappointing stock market performance and the Board’s lack of transparency and engagement. A meeting was held on November 21, 2024, in Madrid, with 16 participants, both in-person and online, who shared their views on how to revitalize DIA.
The coalition’s concerns are rooted in careful analysis and are focused on three main issues: (1) the lack of board expertise, (2) inadequate market engagement, and (3) limited stock liquidity.
Lack of Board Expertise
The coalition believes that DIA’s Board of Directors lacks the necessary expertise to effectively govern the company, particularly in the food retail sector. The Board is chaired by a representative of LetterOne, the largest shareholder, but only two board members have experience in retail. Moreover, no board member has more than ten years of experience in the food retail sector, and none have expertise in proximity food retail in Europe, which is DIA’s core business model. This lack of relevant experience is seen as a major barrier to making informed, strategic decisions that could propel the company forward.
Inadequate Market Engagement
Another key issue raised by the coalition is DIA’s failure to effectively communicate its turnaround efforts to the market. Despite some operational improvements and better-than-expected financial results, DIA has struggled with poor communication to investors and analysts. This lack of transparency has resulted in a depressed share price that does not reflect the company’s true potential. The coalition emphasizes that the absence of a clear investor relations strategy, along with the lack of medium-term financial targets and limited visibility on changes to the company’s asset portfolio, has created uncertainty in the market. This ongoing uncertainty hampers investor confidence and impedes the company’s recovery.
Limited Liquidity
The coalition also raised concerns about DIA’s stock liquidity, which they argue is preventing the company from realizing its true value in the market. There is a significant valuation gap between DIA and its peers, and the coalition believes that addressing the liquidity issue could help close this gap. The coalition suggests that increasing liquidity could be achieved by encouraging LetterOne to gradually sell some of its shares into the market or by implementing a reverse stock split, a measure previously suggested by DIA’s Investor Relations team. The coalition also notes that studies show that higher trading volumes and increased market capitalization can have a positive effect on stock returns. Therefore, the coalition argues that the Board’s failure to act in this regard is neglecting its fundamental duty to act in the best interests of shareholders.
Call for Immediate Action
In light of these concerns, the coalition urges the Board to take immediate action to address the issues outlined in their letter. They recommend the following steps:
- Appoint a representative of minority shareholders to the Board, ideally someone with relevant and recent sector experience, to ensure all shareholders’ interests are adequately represented.
- Revise the executive management team’s economic incentives to align them with the goal of driving growth and enhancing shareholder value.
- Develop and present a comprehensive strategic plan with medium-term targets that emphasize DIA’s growth potential and the opportunity to increase the company’s stock value.
- Launch a robust investor relations and marketing program to better promote DIA within the investment community.
- Implement measures to increase the liquidity of DIA’s stock, such as encouraging LetterOne to reduce its stake or undertaking a reverse stock split or other non-dilutive measures that the Board may deem appropriate.
The coalition believes these steps are essential for bridging the valuation gap between DIA’s current share price and its true market value. By taking decisive action, the coalition argues that DIA can reclaim its position as a leading Spanish company. A copy of the letter will be made available on the coalition’s website and shared with relevant media outlets in due course.
