* Deal worth 100 million euros excluding debt - report
* Would consolidate Dia as third largest grocer in Spain
* Shares gain 3.4 percent
(Recasts with confirmation of talks, adds details on stores and
By Tracy Rucinski
MADRID, Dec 16 Spanish discount grocer Dia
is in preliminary talks to buy debt-burdened
supermarket chain El Arbol, in a deal that would consolidate its
position as Spain's third-largest retailer behind Mercadona and
Dia, whose discount format has thrived in Spain during a
prolonged economic slump, has been on the hunt for distressed
rivals to boost its domestic presence.
Earlier, newspaper Expansion cited sources close to the deal
as saying the acquisition could be agreed for around 100 million
euros ($137 million), excluding debt.
In a regulatory filing on Monday, Dia confirmed initial
talks to acquire El Arbol as part of its strategy to seek growth
opportunities, but gave no financial details, saying only that
no agreement had yet been reached.
"(This is) potentially positive for Dia if it manages to
increase its scale in Spain at an attractive valuation,"
Espirito Santo Research said in a note to clients.
Shares in Dia climbed 3.4 percent to 6.35 euros by 1140 GMT,
making them the top gainers in Spain's blue-chip index.
A 100 million euro enterprise value for El Arbol would be
equivalent to five times 2012 earnings before interest, taxes,
depreciation and amortisation (EBITDA), or 12 percent of sales,
El Arbol, controlled by a group of savings banks and two
Spanish businessmen, is struggling with net debt which reached
31 million euros in 2012 after an acquisition spree in recent
years. Its net profit in 2012 was 2.1 million euros.
It is Spain's 15th-largest food retail group - according to
analysts citing research group Euromonitor - with 452 stores,
most of which are in the northern part of the country, making it
a good geographical fit for Dia which has a larger presence in
Last year Dia bought the Spanish and Portuguese arms of
insolvent German drugstore chain Schlecker in a move to
diversify its product range and expand its presence on the
A deal with El Arbol would allow Dia, with 7,182 stores
internationally, to raise its domestic sales and market share by
20 percent, Espirito Santo said.
The company, with 5 billion euros of annual sales in Spain
and a market share of 9 percent, lags behind its main rival,
unlisted Mercadona, which has 11 billion euros of sales and a 20
percent market share.
($1 = 0.7283 euros)
(Editing by Louise Heavens and David Holmes)