Dollarama to buy 50.1% stake in Latin American value retailer Dollarcity

FILE PHOTO: A pedestrian walks past a Dollarama store in Ottawa, Ontario, Canada, September 1, 2016. REUTERS/Chris Wattie/File Photo

(Reuters) - Dollarama Inc DOL.TO said on Tuesday it would acquire a 50.1% stake in Latin American value retailer Dollarcity, as the Canadian discount store operator looks to expand in the region.

The deal, valued in the range of $85 million to $95 million, includes an upfront payment of $40 million at closing, which is expected in August.

The deal is expected to add to Dollarama’s earnings per share in the range of 2 Canadian cents to 3 Canadian cents for the rest of fiscal year ending Feb. 2, and 5 Canadian cents to 7 Canadian cents in fiscal 2021.

In February 2013, Dollarama entered into an agreement with Dollarcity to share its business expertise and provide sourcing, which also included an option for the former to acquire a 50.1% stake. This agreement was amended in 2016 to postpone the call option window by one year, from February 2019 to February 2020.

Dollarcity’s board will consist of five directors - three from Dollarama and two from Dollarcity’s founding group.

As of March 31, Dollarcity had 180 stores, including 44 in El Salvador, 54 in Guatemala and 82 in Colombia.

Reporting by Shanti S Nair in Bengaluru; Editing by James Emmanuel