Dollarama Increases Equity Interest And Expands Partnership In Latin America
- Increases equity interest in Dollarcity to 60.1% with acquisition of additional 10.0% stake
- Acquires option to purchase additional 9.89% equity interest in the future
- Expands partnership countries to include Mexico with an 80.05% equity interest and initial entry planned for 2026
MONTREAL, June 12, 2024 /PRNewswire/ - Dollarama Inc. (TSX: DOL) ("Dollarama" or the "Corporation") announced today that it has acquired an additional 10.0% equity interest in Latin American value retailer Dollarcity in exchange for the issuance of 6,060,478 common shares of Dollarama. As a result, Dollarama now owns a 60.1% equity interest in Dollarcity and has an option to purchase an additional 9.89% equity interest at any time on or before December 31, 2027.
Dollarama and the Dollarcity founding stockholders have also agreed on governance terms providing for the future expansion of the business to a new country, Mexico. Dollarama and the Dollarcity founding stockholders will indirectly have an 80.05% and 19.95% equity interest, respectively, in the Mexico portion of the business. Dollarcity intends to pilot its first store in Mexico in calendar 2026.
"Dollarcity continues to represent a compelling, long-term growth platform for Dollarama, with the Dollarcity leadership team successfully executing on its strategy throughout the course of our over decade-long partnership. Since we initially acquired a majority equity interest in 2019, Dollarcity has more than tripled its revenues and significantly grown its presence in key LATAM markets, demonstrating the underlying strength of its business model and the appetite for our value proposition from LATAM consumers," said Neil Rossy, President and Chief Executive Officer of Dollarama.
"With its strong leadership team, Dollarcity is well-positioned to continue delivering profitable growth, both from its current markets of operation and as we eye our next market of entry. We look forward to preparing for entry in Mexico in the near term, a large and dynamic market with untapped potential in the value retail space, guided by the same careful and disciplined approach as with our successful entries in Colombia in 2017 and in Peru in 2021."
The transaction is expected to be neutral to Dollarama's net earnings per share for the fiscal year 2025.
Dollarcity Store Count and New Long-term Target
As at March 31, 2024, Dollarcity had 547 stores with 324 locations in Colombia, 99 in Guatemala, 72 in El Salvador and 52 in Peru. Following an updated evaluation of the market potential, Dollarcity's management has revised its long-term store target in these four current markets of operation to 1,050 stores by 2031, up from its previous target of 850 stores by 2029. The increased target reflects anticipated growth primarily in Peru and Colombia and does not take into account any future expansion in Mexico.
Other Transaction Details
Pursuant to the call option, Dollarama is entitled to acquire an additional 9.89% equity interest in Dollarcity and a corresponding 4.945% equity interest in the Mexico partnership at any time on or before December 31, 2027.
Other than for the addition of the call option, no material changes have been made to the terms of the stockholders' agreement, sourcing agreement and services agreement entered into between the parties with respect to the business being currently operated by Dollarcity. In addition, the governance terms that will apply to Mexico and its future operations, including with respect to certain specified strategic and operational decisions to be subject to the approval of all stockholders, will be substantially similar to those applicable to the business currently being operated by Dollarcity.
The 6,060,478 common shares of Dollarama issued in connection with the acquisition of the 10.0% equity interest in Dollarcity were issued by Dollarama on a private placement basis and are subject to a statutory hold period of four months after the date hereof as well as certain contractual transfer restrictions applicable for a 12-month period after the date hereof, subject to specified exceptions. The listing and posting for trading of such common shares of Dollarama, which represent approximately 2.1% of all common shares issued and outstanding of Dollarama as of the date hereof (on a non-diluted basis), has been conditionally approved by the Toronto Stock Exchange ("TSX"), subject only to satisfaction by the Corporation of customary post-closing conditions imposed by the TSX.
The Corporation will continue to have a joint control over Dollarcity, including the Mexico partnership, and account for its investment as a joint arrangement using the equity method.
Please refer to the management's discussion and analysis of Dollarama dated June 12, 2024 for additional details regarding Dollarama, Dollarcity and the transaction.
Forward-Looking Statements
Certain statements in this press release about our current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or any other future events or developments constitute forward-looking statements, including the statements relating to the Dollarcity transaction, the impact of the transaction on Dollarama, including on its net earnings per share for the fiscal year 2025, and the markets and growth opportunities in Latin America. The words "may", "will", "would", "should", "could", "expects", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "predicts", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases, are intended to identify forward-looking statements.
Forward-looking statements are based on information currently available to management and on estimates and assumptions made by management regarding, among other things, general economic and geopolitical conditions and the competitive environment within the retail industry in Canada and in Latin America, in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including the factors which are outlined in the management's discussion and analysis for the first quarter of the fiscal year ending February 2, 2025 and discussed in greater detail in the "Risks and Uncertainties" section of the Corporation's annual management's discussion and analysis for the fiscal year ended January 28, 2024, both available on SEDAR+ at www.sedarplus.com and on the Corporation's website at www.dollarama.com.
These factors are not intended to represent a complete list of the factors that could affect the Corporation or Dollarcity; however, they should be considered carefully. The purpose of the forward-looking statements is to provide the reader with a description of management's expectations regarding the Corporation's and Dollarcity's financial performance and may not be appropriate for other purposes. Readers should not place undue reliance on forward-looking statements made herein. Furthermore, unless otherwise stated, the forward-looking statements contained in this press release are made as at June 12, 2024 and management has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All of the forward‑looking statements contained in this press release are expressly qualified by this cautionary statement.
First Quarter Results and Dollarcity Transaction Conference Call
Dollarama will hold a conference call to discuss its fiscal 2025 first quarter results and the Dollarcity transaction today, June 12, 2024 at 11:00 a.m. (ET) followed by a question-and-answer period for financial analysts only. Other interested parties may participate in the call on a listen‑only basis via live audio webcast accessible through Dollarama's website at www.dollarama.com/en-CA/corp/events-presentations.
About Dollarama
Dollarama is a recognized Canadian value retailer offering a broad assortment of consumable products, general merchandise and seasonal items both in-store and online. Our 1,569 locations across Canada provide customers with compelling value in convenient locations, including metropolitan areas, mid-sized cities and small towns. Select products are also available, by the full case only, through our online store at www.dollarama.com. Our quality merchandise is sold at select fixed price points up to $5.00.
Dollarama also owns a 60.1% interest in Dollarcity, a growing Latin American value retailer. Dollarcity offers a broad assortment of consumable products, general merchandise and seasonal items at select, fixed price points up to US$4.00 (or the equivalent in local currency) in 547 conveniently located stores in El Salvador, Guatemala, Colombia and Peru.
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SOURCE Dollarama Inc.
