UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC
20549
FORM 6-K
REPORT OF FOREIGN
ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16
OF
THE SECURITIES EXCHANGE ACT OF
1934
For January, 2009
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Distribution and Service
D&S, Inc.
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(Translation of registrant’s
name into English)
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Avenida Presidente Eduardo Frei
Montalva 8301
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Quilicura, Santiago,
Chile
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(Address of principal
executive offices)
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Indicate
by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F:
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(1):
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted
by Regulation S-T Rule 101(b)(7):
Indicate
by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
If
“Yes” is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): N/A
Santiago,
January 14, 2009
United
States Securities and Exchange Commission
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Ref:
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Information and
Documentation Required to be Furnished according to Form 6 -
K
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Reference
is made herein to the tender offer for shares of Distribución y Servicio D&S
S.A. (“D&S”) carried out by Inversiones Australes Tres Limitada, a
subsidiary of Wal-Mart Stores Inc., as of December 23, 2008, in order to acquire
6,520,000,000 shares in D&S, representing 100% of the capital stock of the
company.
In
compliance with the laws of the jurisdiction in which Distribución y Servicio
D&S S.A. is incorporated, i.e. section 207, subsection (c) of the
Ley de Mercado de
Valores
(Securities Market Law) of the Republic of Chile, each board
member of D&S must deliver a written report including a reasoned opinion
regarding the advisability of the tender offer to the shareholders. In said
report, the respective board member shall make a disclosure, if any, of its
relationship with the controller of the target company and the offeror and the
interest it may have in the offer. The information so presented must be made
available to the public jointly with the prospectus and a copy thereof be
delivered to the Superintendence of Securities and Insurance of the Republic of
Chile, to the stock exchanges, to the offeror and to the manager or organizer of
the offer, if any, within the following 5 days as of the public disclosure of
the offer.
Accordingly,
please find enclosed herewith full English translations of the abovementioned
written reports delivered by Distribución y Servicio D&S S.A.’s board
members Messrs. Nicolás Ibáñez Scott, Felipe Ibáñez Scott, Verónica Edwards
Guzman, Felipe Larraín Bascuñán, Manuel Francisco Gana Eguiguren, Jonny Kulka
Fraenkel, Fernando Larraín Cruzat and Alberto Eguiguren Correa to the
stockholders of D&S.
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Distribución
y Servicio D&S S.A.
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By:
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Enrique
Ostalé Cambiasso
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Title:
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General
Manager
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In the
City of Santiago, December 29, 2008.
To the
Shareholders of Distribución y Servicio D&S S.A.
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Our Ref:
Written report on the
advisability of the tender offer for shares of D&S made by Inversiones
Australes Tres
Limitada
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In my
capacity as director of Distribución y Servicio D&S S.A., (hereinafter
indistinctly referred to as "D&S" or the "Company") and in compliance with
the provisions set forth in subsection c) section 207 of the
Ley sobre Mercado de Valores
(Securities Market Law) No. 18.045, I hereby send you the written report along
with my opinion on the advisability of the for shares of the Company made by
Inversiones Australes Tres Limitada, a subsidiary wholly owned (100%) by
Wal-Mart Stores, Inc. (hereinafter also referred to as the
“Offeror”).
On
December 23, 2008, the Offeror published in the newspapers El Mercurio and La
Tercera, the announcement of the commencement of the tender offer for shares of
6,520,000,000 shares in D&S, representing 100% of the capital stock of the
Company (the “Offering”) at a price of US$0.408 per share, payable in United
States dollars or its equivalent amount in pesos, national currency, according
to the average "
Dólar
Observado
" exchange rate (observed exchange rate) published by Banco
Central de Chile within the period of six trading days that ends on the date of
payment, at the option of the tendering shareholder (the “Offered Price”), under
the terms and conditions set forth in the publications mentioned above and in
the prospectus of the Offering that the Offeror has made available to the
interested parties.
2.
Reporting
Director-Controlling Group Relationship
I inform
the shareholders that I have been a Director of the Company since April 2005 and
that I do not have any investments in shares in D&S . I have been elected as
Director by the votes of the controlling shareholders.
3.
Reporting Director-Offeror
Relationship
I inform
the shareholders that I have neither had nor have any relationship with the
Offeror.
4.
Potential Interest of the
Reporting Director in the Transaction
I have no
economic or professional interest in this transaction. My only interest is to
ensure that all the shareholders receive the most complete information so that
they can make a well-informed decision.
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5.
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Opinion of the
reporting director on the advisability of the Offering for the
shareholders of
D&S
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In my
opinion, the Offering is beneficial for the shareholders of D&S. I base my
opinion on the following grounds:
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A.
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A.
1. The Offering is addressed to all the shareholders and involves 100% of
the shares of the company. Therefore, the apportionment mechanisms does
not apply and, consequently, those shareholders that wish to sell have the
possibility to sell 100% of their shares. This is important because,
should the Offering be declared successful as a consequence of the
fulfillment of the “Success Condition” set by the Offeror (to receive
tenders for at least a 50.01% of the shares in the company) the
liquidity of the share in D&S may diminish in the
future.
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B.
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The
Offered Price shall be paid in cash and the Offeror shall finance the
total amount of the Offering with resources to be provided by its parent
company Wal-Mart Stores, Inc., a corporation that, according to the
information provided in the prospectus of the Offering, relies on its own
resources and/or those credit facilities available for such
purpose.
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C.
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The
offered price is favorably compared with the following market target
parameters:
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1)
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The
last closing price of the share in D&S in force on the date on which
the Offeror announces its intention to make the Offering and the terms
thereof, was $195 per share. It is worth bearing in mind that in the last
day of the transaction of the share before the announcement of the
Offering, the price of the share rose by more than
7%.
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2)
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The
premium or price premium offered versus the market price ranges from 35.4%
to 41.2% pursuant to the following table. In my opinion, it represents an
attractive premium considering the current conditions of the stock
exchanges, as well as the capacity to generate future flows by the
Company.
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Premium
or premium of price Offered versus market price
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Premium
versus average closing price last 30 days
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41.2
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%
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Premium
versus average closing price last 60 days
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36.9
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%
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Premium
versus average closing price last 90 days
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36.5
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%
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Premium
versus average closing price last 180 days
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35.4
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%
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3)
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The
most recent “target price” set by market analysts (mainly by national and
foreign investment banks) that follow the share in D&S, which is known
by me, published before the date of the public announcement of the
Offering. In fact, all those future implications set forth above assumed a
price lower than the Offered Price and many of such analysts did not
actively recommend to purchase the
share.
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The
purpose of this document is to comply, as director of D&S, with the
provisions in force under the
Ley de Sociedades Anónimas
(Stock Companies Act) regarding these transactions, by filing a personal opinion
of the aspects to be relied upon by the shareholders at the time of making their
decisions. Without prejudice to the foregoing, each shareholder must finally
decide only after having consulted with the advisors deemed
appropriate.
Looking
forward that this opinion allows you to make the best decision, I remain, very
truly yours,
Distribución
y Servicio D&S S.A.
In the
City of Santiago, December 26, 2008.
To the
Shareholders of Distribución y Servicio D&S S.A.
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Our Ref:
Report
regarding the tender offer to purchase 6,520,000,000 common shares in
Distribución y Servicio D&S S.A. made on December 23, 2008 by
Inversiones Australes Tres Limitada (a subsidiary of Wal-Mart Stores,
Inc.)
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On
December 23, 2008, the announcement was published in the newspaper El Mercurio
and in the newspaper La Tercera whereby Wal-Mart Stores, Inc ("Wal Mart")
through its subsidiary Inversiones Australes Tres Limitada, made the Tender
Offer for Shares in Distribución y Servicio D&S S.A. (the "Offering"). The
terms and conditions of the Offering (which include an offering simultaneously
made in the United States of America to purchase the American Depositary Shares
representing the common shares in Distribución y Servicio D&S S.A.) are
included in the prospectus that the offeror made available
to Distribución y Servicio D&S S.A. on December 23, 2008 (the
“Prospectus”). Any reference to specific terms or aspects of the Offering must
be construed according to the terms and conditions set forth in such
Prospectus.
I have
been a director of Distribución y Servicio D&S S.A. since December 19,
2008.
I am the
legal advisor and agent of the current controllers of Distribución y Servicio
D&S S.A. and have actively participated in the negotiations and agreements
on the terms of which the Offering is based.
I do not
have with the offeror any relationship that could affect or influence on my
opinion regarding the advisability of the Offering.
Finally,
I represent that I am not a shareholder either directly or indirectly of
Distribución y Servicio D&S S.A. and that I have no particular interest in
the Offering other than my interests derived from the relationships mentioned
above.
Based on
the facts and considerations hereinafter described, in my opinion the Offering
is very beneficial for the shareholders of Distribución y Servicio D&S
S.A.
My
opinion is based on the analysis that I have made of the following facts and
considerations:
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1.
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The
terms and conditions of the Offering set forth in detail in the Prospectus
and specifically (i) the offered price; (ii) the possibility offered to
each shareholder to participate with 100% of their shareholding; and (iii)
that the payment of the price is in cash as of the fourth trading day
following the publication of the Notice of Result, payable in US Dollars
or its equivalent in Pesos according to the average "
Dólar Observado
"
exchange rate (observed exchange rate) published by Banco Central de Chile
within the period of six trading days that ends on the date of payment, at
the option of the tendering
shareholder;
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2.
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The
price tracking of the share in Distribución y Servicio D&S S.A. on the
stock exchange of Santiago during the last 12 months. The offered price is
higher by 41.2% versus the average of the last 30 days. Should we take the
last 180 days, the premium would be 35.4% as of the date of the Offering
announcement;
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3.
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The
offered price acknowledges an appraisal of D&S that is favorably
compared with the multiples at which other companies of the sector are
currently traded, both in Chile and in other Latin American
countries;
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4.
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The
offered price is 174.97% higher than the book value of the share according
to the last financial information delivered by the Company to
the Superintendencia de Valores y
Seguros;
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5.
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These
price relations represent a significant profit for the shareholders who
finally accept the Offering;
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6.
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However,
the shareholders must be aware of two aspects that are essential for the
materialization of the Offering: (i) the offeror has set forth a set of
conditions to succeed in its effort; and (ii) the Offering may only be
concluded upon the tendering of no less than 50.01% of the shares in the
Company;
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7.
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Accordingly,
two related risks arise from the foregoing: (i) that the offeror desists
upon the occurrence of any of the grounds set forth in the Prospectus; and
(ii) that as a consequence of a successful Offering, liquidity of the
share in Distribución y Servicio D&S S.A. shall significantly
diminish.
Taking
into account that all commercial transactions involve several risk
degrees, I believe that the interests of the shareholders of Distribución
y Servicio D&S S.A. are reasonably protected by the characteristics of
the Offering.
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In
consideration of the foregoing, my opinion to the shareholders of Distribución y
Servicio D&S S.A. is that the Offering is beneficial, timely and very
satisfactory, beyond any indirect equity interests described in the Previous
Representations.
Furthermore,
I, in my capacity as Director of Distribución y Servicio D&S S.A., and as
required by law, do hereby state the preceding
considerations.
I further
represent that my opinion neither is nor may it be construed, directly or
indirectly, as a suggestion or advice to sell or maintain shares in the Company.
Shareholders must evaluate the Offering regardless of this opinion, and must
take a decision taking into account their growth expectations of the company,
within the uncertain worldwide macroeconomic context and regardless of the
intentions expressed by Wal Mart with regard to the future of the shareholders
of Distribución y Servicio D&S S.A., as stated in the Prospectus.
Shareholders have, as always, full freedom to require the specific advice they
deem appropriate that best suits their interests.
Distribución
y Servicio D&S S.A.
In the
City of Santiago, December 29, 2008.
To the
Shareholders of Distribución y Servicio D&S S.A.
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Our Ref:
Written report on the
advisability of the tender offer for shares of D&S made
by Inversiones Australes Tres
Limitada
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In my
capacity as director of Distribución y Servicio D&S S.A. (hereinafter
referred to, indistinctly, as "D&S" or the "Company") and in compliance with
the provisions set forth in subsection c) of section 207 of the
Ley sobre Mercado de Valores
(Securities Market Law) No. 18.045, I hereby send you the written report along
with my opinion on the advisability of the tender offer for shares of the
Company made by Inversiones Australes Tres Limitada, a subsidiary wholly owned
(100%) by Wal-Mart Stores, Inc. (hereinafter also referred to as the
“Offeror”).
On
December 23, 2008, the Offeror published in the newspapers
El Mercurio
and
La Tercera
, the announcement
for the commencement of tender offer for 6,520,000,000 shares in D&S,
representing 100% of the capital stock of the Company (the “Offering”) at a
price of US$0.408 per share, payable in United States dollars or its equivalent
amount in pesos, national currency, according to the average "
Dólar Observado
" exchange
rate (observed exchange rate) published by the
Banco Central de Chile
within
the period of six trading days that ends on the date of payment, at the option
of the tendering shareholder (the “Offered Price”), under the terms and
conditions set forth in the publications mentioned above and in the prospectus
of the Offering that the Offeror has made available to the interested
parties.
2.
Reporting
Director-Controlling Group Relationship
I am a
member of the controlling group of Distribución y Servicio D&S S.A. and
hereby act in my capacity as Director and Chairman of the Board
of Directors thereof.
3.
Potential Interest of the
Reporting Director in the Transaction
I do not
have with the offeror any relationship that could affect or influence on my
opinion regarding the advisability of the Offering, other than the one that
derives from my capacity as member of the controlling group and from the fact
that part of the shares under my control shall be sold during the tender
offer.
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4.
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Opinion of the
reporting director on the advisability of the Offering for the
shareholders of
D&S
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In my
opinion, the Offering is beneficial for the shareholders of D&S. I base my
opinion on the following grounds:
A.
Considerations regarding the
characteristics of the Offering
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A.
1.
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The
Offering is addressed to all the shareholders and involves 100% of the
shares in the company. Therefore, the apportionment mechanism does not
apply and, consequently, those shareholders that wish to sell have the
possibility to sell 100% of their shares. This is important because,
should the Offering be declared successful as a consequence of the
fulfillment of the “Success Condition” set by the Offeror (to receive
tenders for at least a 50.01% of the shares in the company) the
Offeror shall be bound to acquire 100% of the tendered shares , without
any limitation. However, the "free float" shall be diminished and
therefore, the liquidity of D&S share will diminish in the future,
affecting its current
liquidity.
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A.
2.
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The
Offered Price shall be paid in cash and the Offeror shall finance the
total amount of the Offering with resources to be provided by its parent
company Wal-Mart Stores, Inc., a corporation that, according to the
information provided in the prospectus of the Offering, relies on its own
resources and/or those credit facilities available for such
purpose, the long-term debt of which has been (internationally) ranked as
AA by Standard & Poor's and Fitch Ratings and Aa2 by Moody's.
Therefore, the Offering, if successful, shall not have any risk associated
to the payment of the offered
price.
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B.
Considerations regarding the
offered price
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B.l
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The
Offeror assesses D&S in US$2,660 million. This is translated in a
price per share of approximately $260, according to the value of the
dólar observado
(observed dollar) in force in the day of the public announcement of the
transaction.
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B.2.
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The
offered price is favorably compared with the following market target
parameters, according to the public information
available:
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a)
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The
last closing price of the share in D&S in force on the date on which
the Offeror announces its intention to make the Offering and the terms
thereof, of $195 per share.
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b)
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The
average market price of the share in D&S based on different periods of
time, prior to the announcement of the
transaction:
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Premium
or premiun of price Offered versus market price
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Premium
versus average closing price last 30 days
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41.2
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%
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Premium
versus average closing price last 60 days
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36.9
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%
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Premium
versus average closing price last 90 days
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36.5
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%
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Premium
versus average closing price last 180 days
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35.4
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%
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c)
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The
“market price” of the share in D&S, as such term is defined in section
199 of Law No. 18,045 (i.e., the one resulting from calculating the
weighed average of those trading transactions performed between the
90
th
.
trading day and the 30
th
trading
day), calculated on the date of the Offeror’s public announcement of the
Offering. The "market price” thus calculated, is $194 per
share.
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d)
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The
“market value” of the share in D&S, as such term is defined in
paragraph 3 of section 79 of the
Reglamento de Sociedades
Anónimas
(Stock Companies Regulation) (i.e., the one that results
from calculating the weighed average of the trading transactions of the
share in the preceding two months), calculated on the date of the
Offeror’s public announcement of the Offering, is approximately $191 per
share.
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e)
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The
most recent “target price” set by market analysts that follow the share in
D&S, which is known by me, published before the date of the public
announcement of the Offering. In fact, all those future implications set
forth above assumed a price lower than the Offered
Price.
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B.3
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Moreover,
the Offered Price implies a valorization of D&S as an ongoing concern
that is favorably compared with the current valorization at which other
companies of the sector currently do business, both in Chile and in the
rest of Latin America. I have based my analysis on two multiples commonly
used to compare the valorizations of retail companies in the region,
namely:
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(i) Firm
Value or / Sales; and
(ii) Firm
Value or / EBITDA
In order
to make the analysis, I have taken into account the following assumptions: (a)
as “Firm Value” (“FV”) of D&S the total amount of the Offering of US$2,660
million, plus the net indebtedness (debt less cash and cash equivalents) and the
minority interest of the Company according to its financial statements (FECU) as
of September 30, 2008; (ii) as "Sales" the consolidated performance income; and
(iii) as EBITDA, the operational result plus the depreciation and
amortization of the Company for the respective consolidated period. The
multiples have been calculated based on three references of Sales and EBITDA:
(a) the EBITDA for the period of 12 months as of September 30, 2008; and (b) the
D&S expected EBITDA for 2008 and 2009 according to market consensus
estimates. Such multiples are hereinafter transcribed:
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Price
Offered in US$ x Number of shares
(million)
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0.408
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6,520
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=
Total Amount of the Offering (US$ million)
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2,660
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+
net indebtedness and minority interest (US$ million)
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1,091
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3,751
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-
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FV
/ sales last 12 months as of 09/30/2008 (times)
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1.1
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x
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F V
/ expected Sales 2008 (times)
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1.1
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x
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F V
/ expected Sales 2009 (times)
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l.0
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x
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FV
/ EBITDA last 12 months as of 09/30/2008 (times)
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13.7
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x
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F V
/ expected EBITDA 2008 (times)
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13.4
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x
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F V
/ expected EBITDA 2009 (times)
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x
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Source:
Financial Information of D&S according to FECU as of 09/30/2008; "IBES
estimates" and Factset as of December 19, 2008.
In fact,
both the FV/Sales multiples as well as the FV/EBITDA multiple of D&S implied
in the Offered Price is favorably compared with the FV/Sales and FV/EBITDA
multiples (using similar assumptions) at which other companies of the sector
usually trade, both in Chile and in the rest of Latin America, as set forth in
this table:
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FV/ Sales
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FV/EBITDA
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UDM
1
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2008E
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2009E
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UDM
1
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2008E
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2009E
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Retailers
of food products Latin America (1)
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Average
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0,8
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x
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0,7
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x
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0,7
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x
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8,9
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x
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9,0
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x
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7,8
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x
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Mean
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0,7
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x
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0,6
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x
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0,5
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x
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8,4
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x
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7,7
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x
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6,4
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x
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Other
Chilean retailers (2)
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Average
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0,9
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x
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l,l
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x
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l,0
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x
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7,0
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x
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8,5
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x
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7,3
|
x
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Mean
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0,9
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x
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l,l
|
x
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l,0
|
x
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5,7
|
x
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7,2
|
x
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6,0
|
x
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Note:
Firms that were taken into account: (1) Walmex, Soriana, CBD, Cencosud and
Éxito; (2) Ripley, Falabella y La Polar
!
Last
twelve months as of September 30, 2008
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|
B.4
|
The
offered price represents a D&S valorization that is also favorably
compared with the multiples of FV/Sales and FV/EBITDA implied in recent
change of control transactions in the Latin American sector, as shown in
this table
1
:
|
|
|
|
FV/Sales
|
|
|
FV/EBITDA
|
|
|
Average
|
|
|
0,6
|
x
|
|
|
9,9
|
x
|
|
Mean
|
|
|
0,6
|
x
|
|
|
9,9
|
x
|
|
|
B.5
|
Furthermore,
the offered price reflects more than favorably the value of the business
plan currently being performed by the administration of the company,
including its actual investment and expected growth plans, as well as the
efficiency improvement initiatives in
progress.
|
|
|
B.6
|
Although
it was a transaction payable in shares and accomplished on market
conditions other than the current ones, and the comparison should then be
made only for reference purposes, it is also worth stating that the
Offered Price is favorably compared with the D&S share implied price
resulting from applying the exchange ratio of approximately 0.11 share in
Falabella (considering the current market price of the Falabella share)
per each D&S share set in the merger agreement executed in May 2007
between the controlling shareholders of D&S and Falabella. Based on
the closing price of the Falabella share as of December 24, 2008, this
exchange ratio would result in an implied per share in D&S of
$181.5.-
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|
|
B.7
|
If
the calculation is based on the Stock Exchange/Book value that results
from the valorization of the equity D&S in US$2.660 million at the
exchange rate in force on the date of the public announcement of the
transaction, the relation raises to 2.74 times. This ratio is very
favorably compared with those of the other Chilean retail public companies
that list their shares on the Stock Exchange as of December 24, 2008,
where the simple average thereof, excluding D&S, shows a ratio of 1.29
times.
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|
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B.8
|
Finally,
it is necessary to consider the time and context in which the Public
Offering of Shares at issue is made. Relative values of the assets located
in Chile and abroad have been considerably reduced and therefore, the
value of this public offering is particularly beneficial for the
shareholders in these
circumstances.
|
1
It takes
into account the following acquisitions: Acquisition of Wong by Cencosud (Peru,
12/16/07), of Gigante by Soriana (Mexico, 12/07/07), of GBarbosa by Cencosud
(Brazil 11/07/07), of CBD by Assai (Brazil 11/02/07) of Almacenes Éxito by
Casino (Colombia, 05/03/07), of Atacadao by Carrefour (Brazil, 04/23/07) and of
Carulla Vivero by Almacenes Éxito (Colombia, 08/22/06). Should we include the
merger of D&S with Falabella which, although agreed upon, was never
implemented, the sample mean would be 0,7x and 9,9x FV/Sales and FV/EBITDA,
respectively.
Pursuant
to the considerations set forth above, I, the undersigned, in my capacity as
Director of Distribución y Servicio D&S S.A., and as required by law, do
hereby favorably consent to the Offering and express my favorable
opinion thereon to the shareholders of D&S stating that it is very
beneficial because of: a) the premium offered by the Offeror; and b) the current
circumstances in which this Public Offering of Shares is being
made.
Not
withstanding the foregoing, I further represent that my favorable opinion set
forth herein neither is nor may it be construed, directly or indirectly, as a
suggestion or advice to sell or maintain shares in D&S.
Therefore,
I also state that the shareholders in D&S must evaluate the Offering
regardless of this opinion, and must take a decision thereon, taking into
account the own characteristics of D&S, the market context in which it
operates as well as the intentions expressed by Wal-Mart with regard to the
future of the shareholders of Distribución y Servicio D&S S.A., as stated in
the Prospectus.
Chairman
of the Board of Directors
Distribución
y Servicio D&S S.A.
Santiago,
December 30, 2008
In my
capacity as director of Distribución y Servicio D&S S.A., (hereinafter
indistinctly referred to as "D&S" or the "Company") and in compliance with
the provisions set forth in subsection c) of section 207 of the
Ley sobre Mercado de Valores
(Securities Market Act) No. 18.045, I hereby send you the written report along
with my opinion on the advisability of the tender offer for shares of the
Company launched by Inversiones Australes Tres Limitada, a subsidiary wholly
owned by Wal-Mart Stores, Inc. (hereinafter also referred to as the
“Offeror”).
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-
|
On
December 23, 2008, the Offeror published in the newspapers El Mercurio and
La Tercera, the announcement of the commencement of the tender offer for
6,520,000,000 shares in D&S, representing 100% of the capital stock of
the Company (the “Offer”) at a price of US$0.408 per share, payable in
United States dollars or its equivalent amount in pesos, national
currency, according to the average "Dólar Observado" exchange rate
(observed exchange rate) published by Banco Central de Chile within the
period of six trading days that ends on the date of payment, at the option
of the tendering shareholder (the “Offered Price”), under the terms and
conditions set forth in the publications mentioned above and in the
prospectus of the Offer that the Offeror has made available to the
interested parties.
|
2.
Previous Representations
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-
|
Since
April 2000 I am the Regular Director of
D&S.
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|
-
|
I
also act as Director of Administradora de Créditos Comerciales Presto
S.A., a subsidiary of D&S
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|
-
|
I
have no equity or professional relationship with the Offeror, its
shareholders and/or related
persons.
|
|
-
|
I
am the General Manager of the company Larrain Vial S.A., an entity that
controls Larrain Vial S.A. Corredora de Bolsa ("the Broker"). The Broker
has provided advisory and financial intermediary services to D&S, and
has prepared for its own clients some economic and financial reports on
such company.
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|
-
|
I
give my opinion in order to comply with the law and in my capacity as
Regular Director of D&S. It is solely based on the terms of the Offer
and the offered price and is independent of the opinions, recommendations
and/or advice made and/or to be made by the Broker on D&S, or the
shares that are offered to the
public.
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|
-
|
My
opinion is not to be considered by the shareholders, either directly or
indirectly, as a suggestion or advice to sell or not to sell their shares,
a decision to be made by the shareholders based on their own
inquiries.
|
I
consider that the offer is advisable for the shareholders of D&S, for the
following reasons:
3-1. The
price is attractive:
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-
|
At
the
dólar
observado
(observed dollar) value in force on 12/19/08, date of the
announcement of the tender offer, the offered price represents a premium
of 35.4% with regard to the average price of the last 180 days before such
announcement.
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|
-
|
Such
price represents an “ongoing concern” valorization (the sum of the equity
value plus the net debt, also known as "firm value") which is favorably
compared with the multiples of “Firm Value” / Sales and “Firm Value” /
EBITDA (Operational Result plus depreciation and amortization), at which
other companies of the sector are currently trade, both in Chile and in
other Latin American
countries.
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|
-
|
If
the Stock Exchange Value/ Book Value ratio, implied in the Offer price is
taken into account, at the observed exchange rate in force as of 12/19/08,
the Offer is favorably compared with that of the other companies of the
sector listed on the Stock Exchange of Santiago, as of the same
date.
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|
-
|
I
believe that the Offered Price accurately reflects the business plan
currently being performed by the administration of the company, including
its actual investment plans and the efficiency improvement initiatives in
progress as well as the expected
growth.
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3-2 The
conditions of the offer are attractive:
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-
|
The
Offer Price shall be paid in cash and, given the creditworthiness of the
Offeror and its parent company, it does not represent, according to my
opinion, any risk associated to the payment
thereof.
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|
-
|
As
it is an offer addressed to all the shareholders and for 100% of the
shares in the company, those shareholders that wish to sell have the
possibility to sell 100% of their
shares.
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3-3
Illiquidity risk if shares are not sold:
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-
|
If
shares are not sold and the Offer is successful as a consequence of the
fulfillment of the "Success Condition" (i.e., receiving acceptances for at
least 50.01% of the shares in the company) an investment shall be
maintained, the liquidity of which shall be substantially reduced. When
shares lose liquidity they tend to increase their volatility and therefore
their risk.
|
Finally,
I would further state that there is a risk factor in the Offer, which is the
fact that the Offer Price is stated in United States Dollars. A significant
assessment of the peso with regard to the dollar, between the date of this
opinion and the Offer could lead me to review my conclusions stated
herein.
Santiago,
December 29, 2008.
To the
Shareholders of Distribución y
Servicio
D&S S.A.
|
Our
Ref:
|
Opinion
regarding the Tender Offer for Shares in Distribución y Servicio D&S
S.A.
|
On
December 23, 2008, announcements were published in the newspaper El Mercurio and
in the newspaper La Tercera whereby Wal-Mart Stores, Inc (hereinafter referred
to as "Wal Mart") through its subsidiary Inversiones Australes Tres Limitada
(the “Offeror”), launched a Tender Offer for 100% of the Shares in Distribución
y Servicio D&S S.A. (the "Offer").
The
offered price is US$0.408 per share, payable in United States dollars (US$) or
its equivalent amount in pesos. The shareholder who elects to receive pesos
shall be liable for the risk of the exchange rate variation according to the
conditions set forth in the Offer.
The Offer
shall be declared successful if the Offeror acquires at least 3,260,652,000
shares, equivalent to 50.01% of the shares in D&S.
In my
capacity as director of D&S and in compliance with the provisions set forth
in the
Ley sobre Mercado de
Valores
No. 18.045 (Securities Market Act), I hereby send you my opinion
regarding the Offer based on the following grounds.
I hereby
represent that I have been a director of D&S since April 24, 2007 and have
been appointed by the votes of the controlling shareholders of the Company, and
that I have no relationship whatsoever with the Offeror.
I further
represent that I am a minority shareholder of D&S, and hold 270,800 shares
that were acquired before becoming a Director of the Company.
I have no
special interest in the Offering, other than those that may derive from the
representations made ut supra and from my participation as a minority
shareholder of D&S.
Considerations
and Opinion
I have
based my opinion on the following aspects:
|
|
•
|
The
offer is for 100% of the shares in D&S, therefore, a great part of the
non-controlling shareholders will probably participate
therein.
|
|
|
•
|
In
consideration of the foregoing, the liquidity of the D&S share in the
market shall significantly fall, should the Offer be
successful.
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|
|
•
|
The
offered price establishes a premium of 36.5% in respect of the average
market price of the 90 days before the Offering, which is favorably
compared with other similar
transactions.
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|
|
•
|
The
current critical situation of the world economy establishes a premium to
the liquidity and a special interest to analyze public offering of shares
that establish significant premiums on the market
price.
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|
|
•
|
The
contribution that the Offeror should provide to D&S as a worldwide
operator, particularly as regards management, technology and acquisition
matters.
|
In my
opinion, the preceding considerations are more important than the potential
contribution to be made by the Offeror to D&S. Therefore, I believe the
offering could be attractive to the shareholders.
This
opinion is based on the public information of the Offer, and is made in order to
comply with the law, in my capacity as director of D&S. Thus, this opinion
may not be construed, directly or indirectly, as a suggestion or advice to sell
shares in D&S. The shareholders of D&S must evaluate this offering
independently to decide on whether or not they will participate
therein.
Felipe
Larraín Bascuñán
Director
of D&S
Distribución
y Servicio D&S S.A.
Our Ref
: Tender Offer
for Shares in Distribución y Servicio D&S S.A.
In
compliance with the provisions set forth in section 207, subsection (c) of the
Ley de Mercado de Valores (Securities Market Law) and in my capacity as director
of Distribución y Servicio D&S S.A., registered with the securities register
of the SVS under number 593 (hereinafter referred to as "D&S", the "Firm",
or the "Company") and a controlling company of the Sociedad Anónima Inmobiliaria
Terrenos y Establecimientos Comerciales, registered with such register under
Number 414, and of Astro S.A., registered under No. 1018, I hereby give my
opinion on the public offer for the purchase of the shares referred to above
(the "Offer"), based on the following grounds:
1.-
Relationship with the Controlling Company of the Company and the
Offeror
I inform
that as of the date hereof, I have no relationship whatsoever with the
Controlling Company. Moreover, neither do I have any relationship with the
Offeror nor any interest in any of its transactions, acts or
agreements.
I have
been a director of D&S S.A. since April 24, 2007, elected by the votes of
AFP Provida, AFP Bansander, AFP Cuprum, AFP Habitat and AFP Santa María. By
virtue of the votes of such investors I am acting as an independent director of
the controlling companies of the Company.
In
compliance with the provisions of section 50 bis of law 18.046, "
Ley sobre Sociedades
Anónimas
" (Stock Companies Law), I am a member of the Committee of
Directors of the Company. Supplementary, according to the decision of the Board
of Directors of the Company, I am a member of the Investment Committee
thereof.
I further
represent that I am a minority shareholder of D&S, and hold 270,000 shares
that were acquired on March 29, 2007, before becoming an independent
Director.
In
consideration of the foregoing, I represent not to have any particular interest
in the Offer, other than those that may derive from the relationships mentioned
above and from my minority participation in the Firm.
As
informed in the announcement published in the newspapers El Mercurio and La
Tercera on December 23, 2008 (the “Notice of Commencement”) Inversiones
Australes Tres Limitada (the "Offeror") has made a tender offer for the purchase
of shares issued by D&S.
The
Offeror intends to acquire 6,520,000,000 shares in D&S, representing 100% of
the capital stock of the Company (the “Offer”) at a price of US$0.408 per share,
payable in United States dollars (“dollars”) or its equivalent amount in pesos
national currency, (“pesos”), according to the average "
Dólar Observado
" exchange
rate (observed exchange rate) daily published by Banco Central de Chile in the
Official Gazette of the Republic of Chile (the “Official Gazette”) in periods of
six trading days that end on the date of payment, at the option of the tendering
shareholder (the “Price”). Should it elect to receive pesos, the tendering
shareholder shall be liable for the risk of the exchange rate
variation.
The Offer
is subject to the condition that at least 3,260,652,000 shares, equivalent to
50.01% of the capital stock of D&S are tendered to the Offeror under the
terms of the Offer.
The other
terms and conditions of the Offer are set forth in the Notice of Commencement
and in the Prospectus of the Offer, information that is made available to the
interested parties and shareholders of D&S at the offices of the company, at
the Superintendencia de Valores y Seguros and at the offices of IM
Trust.
3.- Offer
General Considerations
The terms
and conditions of the Offer, reported both in the Notice of Commencement and in
the Prospectus have been taken into account at the time of drafting this
opinion; the public information of the company available to each and every
shareholder of D&S; the background that I received in my capacity as
director, as a member of the Committee of Directors and also as a member of the
Committee of Investment, and the knowledge of the Company acquired through my
participation in the board of directors of all the subsidiaries (hereinafter,
jointly referred to as the “Offer Information”).
From the
analysis of the information referred to above, the following general
considerations have been taken into account at the time of drafting this
opinion:
a) With
regard to the Success Condition of the Offer. Firstly, it is worth taking into
account that the Offeror has offered to purchase
100% of the shares in
D&S
, which implies the potential exit of all the shareholders not
related to the current controlling companies of the company.
For the
Offer to be declared successful, the Offeror is to receive the tenders of shares
representing at least 50.01% of the total shares issued by the
company.
Pursuant
to the Offer Information, the current controlling companies own 63.4% of the
shares in D&S and would have promised to sell 23.4% thereof. Moreover,
should the sale of 23.4% of the shares of the controlling companies be
insufficient to cover the 50.01% referred to above, they would have agreed to
sell the necessary shares to reach such percentage up to a maximum of an
additional 10%, (e.g., 33.4% of the shares of the controlling companies in the
aggregate).
Therefore,
the shareholders not related to the current controlling companies, who at
present own 36.6% of the shares in D&S, shall sell at least 16.7% of the
shares in D&S for the IPO be declared successful.
b)
With regard to
the future liquidity of the share. Should the IPO be declared successful, the
Offeror shall acquire from 50.01% and 60% of the shares in D&S, while the
current controlling companies shall withhold from 40% to 30% thereof. Therefore,
the participation of the shareholders who decide to reject the offer shall be
reduced from 0% to 19.99%). In such a case, the share should face a scenario of
lower or almost no liquidity, depending on the percentage of acceptances of the
shareholders not related to the controlling companies.
c)
With regard to
the offered premium. Pursuant to the Offer Information, the “premium” offered is
36.5% as compared to the market price of the share in D&S
1
. Such
offered price approximately represents the value of 1 time the annual sale and
of 13.5 times the current EBITDA, values that are positively compared to other
transactions of similar companies.
Therefore,
it is worth reporting that the current controlling companies of D&S
entrusted the investment bank JP Morgan the task to obtain the valorization of
the Company. It concluded that the approximate value of the Company is 2,616
million dollars, amount which coincides with the total value offered by the
Offeror in the IPO. Therefore, it is concluded that the offered premium is a
markup compared to the trade valorization of the Company, but from the viewpoint
of the investigation entrusted by the current controlling companies of D&S,
it represents only an acknowledgement of the valorization of D&S, there
being no additional premium over such valorization. The Offer would be paying to
the shareholders the future commercial plan.
Moreover,
the data contained in the Offer Information disclose that, pursuant to the
stockholders’ agreement entered into on December 19, 2008 between the Offeror
and the current controlling companies of D&S (the "Stockholders’
Agreement"), it is contemplated"(...) the execution of certain services, license
and technical assistance agreements between D&S and the parent company of
the Offeror, Wal Mart Stores Inc., which must be consistent with equity
conditions similar to those habitually prevailing in the market." Such
information does not contain any estimates or data that allow to infer the scope
of the synergies that the Offeror might contribute to D&S which, in its
turn, permit to project the future flows of the Company and therefore, evaluate
the offered price.
d) With
regard to the Policy of Future Dividends of D&S. As stated in the
Information of the Offer, the Stockholders Agreement provides for the
distribution as dividend "the higher figure between the legal minimum and $5
pesos per share in D&S, adjusted per inflation, by establishing a period of
three years in which an agreement of both parties is required to make capital
increases for amounts in excess of 500 million dollars".
1
considering to such effect the provisions set forth in section 199 of the
Ley de Mercado de Valores
(Securities Market Law) No. 18.045.
4. Considerations on the
Positive Effects of Wal-Mart joining as controlling company of
D&S
The
know-how and the size of the transactions of the Offeror and the worldwide
retail market should positively impact on D&S in several
aspects:
a) With
regard to the Operational performance
a. 1 In
the Supermarket area
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•
|
It
should favor a stable negotiation system with the suppliers, looking for
the association with them and the search for improvements in the entire
value chain.
|
|
|
•
|
It
should promote a better supply system, simultaneously achieving reductions
in the prices of their international suppliers, as well as any
improvements in the prices of their imported products (e.g.,
China).
|
|
|
•
|
It
should lead to an increase in its productivity, both in the administration
and in the stores, strongly increasing the sales indicator per each
employee of the Company and that of the sales per square meter of sales
room.
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|
|
•
|
It
should permit to rely on better stock control and reduction
systems.
|
|
|
•
|
It
should generate a raise in the sales of the "Non Food" products, a
competitive advantage of the Offeror broadly known throughout the world
and an element that has a special relevance considering the operational
weaknesses of both D&S and the Chilean supermarket channels in
general.
|
|
|
•
|
It
should imply the possibility of negotiating better prices for logistic
services, particularly including maritime
freights.
|
|
|
•
|
It
should favor a better management and negotiation of own
brands,
|
a.2 With
regard to Real Estate
|
|
•
|
D&S
relies on a significant network of stores at a national level, a situation
that might be leveraged with the contribution of the Offeror. In fact, the
supermarket network shows low penetration in some regions of the country
and inside such network D&S has, in its turn, low participation in the
regional market. Thus, any improvements in the access to financing that
should bring about Wal-Mart's joining (e.g., through capital increase or
financial market) would enable to quickly increase its penetration and
participation therein, therefore generating a positive effect in results
in the short-run.
|
a.3 In
the development of the Information Technologies used by
D&S
• Information
systems, although in a process of improvement in D&S, should be replaced by
those of the Offeror, which are more sophisticated and have a higher
productivity. The replacement of the systems should be expected in order to
consolidate the operation and financial statements. Moreover, the replacement
should imply an increase in the operational expenditure in the short-run, but
with significant productivity improvements in the medium run (2 years
approximately).
a.4 In
the betterment of processes
|
|
•
|
The
Offeror is a worldwide competitive company thanks to the quality of its
processes. From such viewpoint it is expected that similar processes may
be implemented in the short run in D&S. Such implementation, as a
consequence of the required investments, shall result in a brief negative
impact on the results of the Company, but it shall have evident and
significant positive returns in the medium run. As an example,
improvements in the logistics, human resources and supply processes may be
noticed, improvements that will favor the performance of inventories and
the costs of transportation, by increasing productivity and efficiency of
distribution centers and sales
rooms.
|
b) With
regard to the strategic development
|
|
•
|
The
Offeror should establish a long term, stable and consistent throughout the
time Strategic Plan, which will cause the management of the company to be
focused on the critical elements of
success.
|
|
|
•
|
The
Offeror's knowledge of the benchmarks in the different aspects of the
operation, should improve the performance of a series of standards that
are currently below the average for the companies of the
sector.
|
5. Considerations on the
Negative Effects of Wal-Mart joining as controlling company of
D&S
|
|
•
|
The
Offeror is expected to make investments tending to achieve a betterment of
the fundamental processes mentioned above, directed to improve long-term
results. Such investment should reduce profitability in the short
run.
|
|
|
•
|
An
allowance for the payment to JP Morgan’s advisory services in this
transaction should be considered, a payment consisting in 9.5 million
dollars plus expenses, to be accrued with the success of the
IPO.
|
|
|
•
|
Moreover,
the Offeror is likely to consider the write off of the amount disputed in
the lawsuit against Ahold, which would imply an accounting loss of US$ 45
million dollars.
|
|
|
•
|
Furthermore,
given the Offeror’s ignorance of the transactions with credit cards in the
Chilean market, both from the risk and indebtedness viewpoint – an
increase in the allowances for bad debts under Presto credit card is
likely to occur, which amount at present to 8.7%. Such policy would imply
a natural impact in the financial results of D&S, an increase in the
allowances of US$7 million per each additional 1% estimated on such 8.7%
being estimated.
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|
|
•
|
The
Offer Information does not explain the value of certain services, license
and technical assistance agreements that would be entered into by D&S
and the parent company of the Offeror, Wal Mart Stores Inc., should the
IPO be considered successful. Therefore, it is impossible to accurately
estimate the actual positive impact of the future productive improvements
of the Company.
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|
|
•
|
D&S
internationalization in Latin America may be adversely affected by the
characteristics of the Offeror as a multinational company. The Offeror has
the skills and resources necessary to enter the rest of the Latin American
markets independently, thus restricting the future growth of
D&S.
|
Taking
into account the financial, strategical and operational background of D&S,
my opinion as Director is the following:
a) It is
expected that the Offeror generates an important aggregated value to
D&S.
Although
the result of D&S may be affected in the short run, such situation should be
reversed in the medium run (2 years approximately). The Offeror is a relevant
player in the worldwide retail market and will undoubtedly favor that D&S
achieves an increase in the sales higher than the one projected – both in the
budget and in the three-year plan-, also showing an EBIT
increase.
Should
the IPO be successful, D&S's non-food sales might increase, where the
company has a broad space to improve Moreover, there should be an increase in
the market participation in the provinces.
Furthermore,
the Offer Information describes the existence of mandatory minimum dividends
that might cause the long term investment to be potentially
attractive.
b)
Inaccuracy of
the Information on the costs of future agreements with related parties.
Notwithstanding the positive effects that are expected to obtain as a
consequence of Wal-Mart’s taking over the Company, the lack of accurate cost
information that would demand the hiring of services, licenses, technical
advisories and other agreements to be entered into with the Offeror, make it
impossible to quantify the scope of the synergies that might derive from such
takeover and furthermore, prevent from estimating whether the premium offered is
appropriate or not for the transaction.
c)
The acquisition
structure sets forth a dilemma for the minority shareholders. Taking into
account the positive effects of Wal-Mart’s becoming a controlling company of
D&S set forth above, some minority shareholders might consider their
permanency in the company. For this purpose it would be
necessary:
(i) That
at least 45.63 % of the other shares not related to the controlling companies
accept the offer.
(ii) That
a relevant percentage of shares also decides to stay in the Company, so that a
liquid market for the shares continues existing.
Therefore,
the shareholder who elects to stay in the company relying on the fulfillment of
the 2 requirements mentioned above, would run a double risk. First, that many
shareholders take the same course of action causing the Offer to fail, and
second, that very few shareholders follow such course of action, holding a low
liquidity share.
d.
Advisability of the
Offer
: Taking into account the facts mentioned above, the undersigned
estimates that (i) taking into account the premium offered by the Offer
regarding the price of the share in D&S, which is positively compared with
other similar transactions in the Chilean stock exchange or securities market;
(ii) the uncertainty as to the costs of the future agreements with related
parties, which might restrict the scope of the positive effects of the admission
of Wal Mart as a controlling partner of D&S; and (iii) the impossibility of
the minority shareholders to avoid the dilemma mentioned above,
it is advisable to accept
the Offer
in accordance with its terms.
I further
repeat to the shareholders that the considerations that I set forth above are
based on the Offer Information in my capacity as director of D&S and in
compliance of the law. Therefore, such considerations must not be estimated,
directly or indirectly, as a suggestion or advice of the undersigned, pointing
out the fact that the final decision of acceptance or rejection of the Offer is
the personal responsibility of each shareholder.
Moreover,
it is recommended to assess and request for independent advice on your
participation in the Offer as well as to analyze separately the tax, financial
and legal impacts or effects that, in each particular case, would have a
potential sale of your shares and thus, make the decision that best suits your
interest.
ce.
Superintendencia de Valores y
Seguros
(Superintendency of Securities and Insurance)
Bolsa de
Comercio de Santiago
Bolsa de
valores de Valparaíso/
Inversiones
Australes Tres Limitada,
Distribución
y Servicio D&S S.A.
Manuel
Francisco Gana Eguiguren
Distribución
y Servicio D&S S.A.
In the
City of Santiago, December 26, 2008.
To the
Shareholders of Distribución y Servicio D&S S.A.
In my
capacity as director of Distribución y Servicio D&S S.A., and in compliance
with the provisions set forth in subsection c) of the
Ley sobre Mercado de Valores
(Securities Market Law) No. 18.045, I hereby send you the written report along
with my opinion on the advisability of the tender offerfor shares in D&S
that has been made by Inversiones Australes Tres Limitada, a subsidiary of
Wal-Mart Stores, Inc. to the shareholders of D&S.
Such
offering was published in the newspapers
El Mercurio
and
La Tercera
, on December 23,
2008, in which the Offeror states its intention to acquire 6,520,000,000 shares
in D&S, representing 100% of its capital stock at a price of US$0.408 per
share, payable in United States dollars or its equivalent amount in pesos,
national currency, according to the average "
Dólar Observado
" exchange
rate (observed exchange rate) published by Banco Central de Chile in the
Official Gazette of the Republic of Chile within the period of six trading days
that ends on the date of payment, at the option of the tendering shareholder.
Should it elect to receive pesos, the accepting shareholder shall be liable for
the risk of the exchange rate variation.
I further
state to the shareholders, that I am a Director of the Company from before the
Company listed its shares on the stock exchange, and that I have only purchased
shares upon any new issuance thereof. I have been elected as Director by the
controlling shareholders’ votes and have no relationship whatsoever with the
offeror of this tender offer.
With
regard to the Offering, it is worth pointing out that it is addressed to all the
shareholders, that it involves 100% of the shares in the Company and that
therefore the apportionment mechanism does not apply. Consequently, those
shareholders that wish to sell have the possibility to sell 100% of their
shares.
My
opinion on the price and opportunity of this Offering is that, given the current
economic crisis that has adversely affected all the shares and stock exchanges
worldwide, including those of the domestic market, this offering is an
opportunity worth taking into account by the shareholders, in this scenario,
because it permits to obtain liquidity with a premium ranging between 35% and
40% (based on the exchange rate in force on the date of the offering) in
connection with the average price of the share during the last 30
days before the publication date of the Offering. Moreover, the share in D&S
has not had a fall equivalent to other shares of the sector after the impact of
the stock exchange crisis, as shown by the market where any transaction of this
kind could be implemented, after the frustrated merger with
Falabella.
As a
conclusion, the decision of each shareholder must be based on whether his
particular current financial condition enables him to make an investment at a
price with a premium presently material, because should this transaction be
successfully accomplished, the future liquidity of the shares would probably
diminish.
This
opinion is only rendered to comply, as director of D&S, with the provisions
in force under the Securities Act and shows the personal aspects to be relied
upon by the shareholders at the time of making their decisions, and
each shareholder must finally decide only after having consulted with their tax,
legal and financial advisors.
Looking
forward to each of you making the best decision by considering your own
particular interests, I remain, very truly yours,
Santiago,
December 29, 2008
To the
Shareholders of Distribución y Servicio D&S S.A.
|
Our Ref:
Advisability
on the tender offer for shares in D&S made by
Wal-Mart
|
In light
of my 27-year relationship with Distribución y Servicio D&S S.A. (D&S),
in my capacity as former employee, who held the position as General Manager, a
period during which I had the responsibility to lead the company going public
and a significant growth of the company, and acting at present in my capacity as
Director, I believe, having considered the evolution of the trade sector in the
country and throughout the world, the potential scenarios of opportunities and
challenges of D&S and the development options of the firm, the tender offer
for shares made by the subsidiary of Wal Mart in Chile, is highly favorable for
the interest of the shareholders of the firm (apart from the interests of the
other areas related directly or indirectly to D&S such as our
customers, employees, suppliers, etc.).
The
offering made by Wal Mart captures, in my opinion, more than reasonably, the
potential improvement in the absolute values of the price of the share in
D&S, typical of an optimistic scenario. With regard to its relative value,
and compared with the prices of other assets of the similar kind, the offering
implies to place D&S on a very attractive level. From this viewpoint, for
example, the price offered for the shares in D&S is substantially better
than the option to merger with another group of the relevant trade sector of the
market, which was timely evaluated by us and which is of public knowledge,
considering the exchange relationship agreed upon at such time and the price at
which such other company is now quoted.
I believe
that our shareholders will appreciate the effort made to achieve this option.
From the date on which the company went public in 1996, the price offered by the
subsidiary of Wal-Mart implies a value approximately 2.7 times higher in real
terms than the price at which shares in D&S were initially listed on the
stock exchange, equivalent to an annual appreciation of 8.8% on an annual basis.
In order to calculate the investment return, dividends strictly paid by the
company on a yearly basis must be added, consequently, the return is almost 9.6%
per year. This should be considered more than satisfactory considering the risk
associated to the food business activity.
As
previously stated, owing to the worldwide crisis effect on other comparable
securities, the relative valorization of D&S fills us with
expectations.
In
consideration of the foregoing, and of the foreseeable lower liquidity of
D&S in the future, it is difficult to foresee better conditions than those
offered in the tender offer made by Wal-Mart to accomplish the expected returns
of the investment in D&S.
I also
would like to thank the shareholders who have placed their trust in us since the
Company’s going public in December, 1996.
Furthermore,
I annex hereto the background of the characteristics of the offering and the
offered price as well as the representations that I must make in compliance with
the
Ley de Mercado de
Valores
.
It is
worth stating that I give my opinion in my capacity as director of D&S in
compliance with section 207, subsection c) of
Ley sobre Mercado de Valores
(Securities Market Act) No. 18,045, on account of which this opinion shall not
be construed as a recommendation to sell or maintain the shares in D&S, and
each shareholder shall evaluate and make his own decision on the offering
referred to above.
Very
truly yours,
Nicolás
Ibáñez Scott
Director
Distribución
y Servicio D&S S.A.
EXHIBIT
TO THE
OPINION OF THE DIRECTOR MR. NICOLÁS IBAÑEZ SCOTT
CONCERNING
THE TENDER OFFER FOR SHARES IN
D&S,
MADE BY WAL-MART THROUGH ITS SUBSIDIARY IN CHILE
INVERSIONES
AUSTRALES TRES LIMITADA
Without
prejudice to my opinion set forth in my letter dated December 29, 2008 regarding
the advisability of accepting the tender offer made by Inversiones Mares
Australes Tres Limitada (the "Offering"), I request the shareholders of D&S
that, upon considering my opinion, they also take into account the following
background information that may be of their interest:
|
A.
|
Background information
regarding the characteristics of the
Offering
|
A. 1. The
Offering has been made for the benefit of all the shareholders and for 100% of
the shares in D&S. Therefore, if the Offering is successful, the liquidity
of the share in D&S not sold in such process will be diminished in the
future, thus adversely affecting their current liquidity and consequently their
price.
A. 2. The
offered price shall be paid in cash and the Offeror has assured that it shall
finance the total amount of the Offering with resources to be provided by it
parent company Wal-Mart, Inc.Therefore, the Offering, if successful, shall not
have any risk associated to the payment of the offered price.
|
B.
|
Background information
to be taken into account at the time of analyzing the offered
price
|
B. 1. The
offered price is favorably compared with the following market target parameters,
according to the public information available:
|
|
a)
|
The
last closing price of the share in D&S in force on the date on which
the Offeror publicly announces its intention to make the Offering and the
terms thereof, was $195 per
share.
|
|
|
b)
|
The
average market price of the share in D&S based on different periods of
time, prior to the announcement of the transaction, was the
following:
|
|
Premium
or premium of price Offered versus market price
|
|
|
|
|
|
|
|
|
|
Premium
versus average closing price last 30 days
|
|
|
41.2
|
%
|
|
Premium
versus average closing price last 60 days
|
|
|
36.9
|
%
|
|
Premium
versus average closing price last 90 days
|
|
|
36.5
|
%
|
|
Premium
versus average closing price last 180 days
|
|
|
35.4
|
%
|
|
|
c)
|
The
“market price” of the share in D&S, as such term is defined in section
199 of Law No. 18,045 (i.e., the one resulting from calculating the
weighed average of those trading transactions performed between the
90
th
trading day and the 30
th
trading day), calculated on the date of the Offeror’s public announcement
of the Offering, of approximately $194 per
share.
|
|
|
d)
|
The
“market value” of the share in D&S, as such term is defined in
paragraph 3 of section 79 of the
Reglamento de Sociedades
Anónimas
(Stock Companies Regulation) (i.e., the one that results
from calculating the weighed average of the trading transactions of the
share in the preceding two months), calculated on the date of the
Offeror’s public announcement of the Offering, of approximately $191 per
share.
|
|
|
e)
|
The
most recent “target price” set by market analysts that follow the share in
D&S, which is known by me, published before the date of the public
announcement of the Offering. In fact, all those future implications set
forth above assumed a price lower than the Offered
Price.
|
B. 2
Moreover, the Offered Price implies a valorization of D&S as an ongoing
concern that is favorably compared with the current valorization at which other
companies of the sector do business at present, both in Chile and in the rest of
Latin America. In order to make this analysis, two multiples that are commonly
used to compare the valorizations of retail companies in the region, must be
taken into account, namely:
(i) Firm
Value or / Sales; and
(ii) Firm
Value or / EBITDA
In order
to make the analysis, the following assumptions are to be taken into account:
(a) as “Firm Value” (“FV”) of D&S the total amount of the Offering of
US$2,660 million, plus the net indebtedness (debt less cash and cash
equivalents) and the minority interest of the Company according to its financial
statements (FECU) as of September 30, 2008; (ii) as "Sales" the consolidated
performance income; and (iii) as EBITDA, the operational result plus the
depreciation and amortization of the Company for the respective consolidated
period.
The
multiples have been calculated based on three references of Sales and EBITDA:
Sales and EBITDA for the period of 12 months ending on September 30, 2008;
and the D&S expected Sales and EBITDA for 2008 and 2009 according
to the market consensus estimates. Such multiples are hereinafter
transcribed:
|
Firm
Value Calculation:
|
|
|
|
|
|
|
|
|
|
Price
Offered in US$ x Number of shares (million)
|
|
|
0.408
|
|
|
|
|
|
6,520
|
|
|
=
Total Amount of the Offering (US$ million)
|
|
|
2,660
|
|
|
+
net Debt and minority interest (US$ million)
|
|
|
1,091
|
|
|
|
|
|
|
|
|
=
Firm Value or "FV
|
|
|
3,751
|
|
|
|
|
|
|
|
|
Implied
Multiples
|
|
|
|
|
|
|
|
|
|
|
|
FV
/ sales last 12 months as of 09/30/2008 (times)
|
|
|
1.1
|
x
|
|
F V
/ expected Sales 2008 (times)
|
|
|
1,1
|
x
|
|
F V
/ expected Sales 2009 (times)
|
|
|
l.0
|
x
|
|
FV
/ EBITDA last 12 months as of 09/30/2008 (times)
|
|
|
13.7
|
x
|
|
F V
/ expected EBITDA 2008 (times)
|
|
|
13.4
|
x
|
|
F V
/ expected EBITDA 2009 (times)
|
|
12.l
|
x
|
Source:
Financial Information of D&S according to FECU as of 09/30/2008; "IBES
estimates" and Factset as of December 19, 2008.
In fact,
both the FV/Sales multiples as well as the FV/EBITDA multiple of D&S implied
in the Offered Price is favorably compared with the FV/Sales and FV/EBITDA
multiples (using similar assumptions) at which other companies of the sector
usually trade, both in Chile and in the rest of Latin America, as set forth in
the following table:
|
|
|
|
|
|
|
FV/Sales
|
|
|
|
|
|
|
FV/EBITDA
|
|
|
|
|
UDM
1
|
|
|
|
2008E
|
|
|
|
2009E
|
|
|
UDM
1
|
|
|
|
2008E
|
|
|
|
2009E
|
|
|
Retailers
of food products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin
America (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
0.8
|
x
|
|
|
0.7
|
x
|
|
|
0.7
|
x
|
|
|
8.9
|
x
|
|
|
9.0
|
x
|
|
|
7.8
|
x
|
|
Mean
|
|
|
0.7
|
x
|
|
|
0.6
|
x
|
|
|
0.5
|
x
|
|
|
8.4
|
x
|
|
|
7.7
|
x
|
|
|
6.4
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Chilean Retailers (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
0.9
|
x
|
|
|
1.1
|
x
|
|
|
l.0x
|
|
|
|
7.0
|
x
|
|
|
8.5
|
x
|
|
|
7.3
|
x
|
|
Mean
|
|
|
0.9
|
x
|
|
|
1.1
|
x
|
|
|
l.0x
|
|
|
|
5.7
|
x
|
|
|
7.2
|
x
|
|
|
6.0
|
x
|
Note:
Firms that were taken into account: (1) Walmex, Soriana, CBD, Cencosud and
Éxito; (2) Ripley, Falabella y La Polar
!
Last
twelve months as of September 30, 2008.
|
|
B.
3
|
The
offered price represents a D&S valorization that is also favorably
compared with the multiples of FV/Sales and FV/EBITDA implied in recent
change of control transactions in the Latin American sector, as shown in
this table
1
:
|
|
|
|
FV/Sales
|
|
|
FV/EBITDA
|
|
|
Average
|
|
|
0.6
|
x
|
|
|
9.9
|
x
|
|
Mean
|
|
|
0.6
|
x
|
|
|
9.9
|
x
|
|
|
B.4
|
Furthermore,
the offered price reflects more than favorably the value of the business
plan currently being performed by the administration of the company,
including its actual investment and expected growth plans, as well as the
efficiency improvement initiatives in
progress.
|
|
|
B.5
|
Finally,
although it was a transaction payable in shares and accomplished on market
conditions other than the current ones, and the comparison should then be
made only for reference purposes, it is also worth stating that the
Offered Price is favorably compared with the D&S share implied price
resulting from applying the exchange ratio of approximately 0.11 shares in
Falabella (considering the current market price of the Falabella share)
per each D&S share set in the merger agreement executed in May 2007
between the controlling shareholders of D&S and
Falabella.
|
C-
Representations made in compliance with the Ley de Mercado de Valores
(Securities Market Law)
C.l I
declare that I am a member of the controlling group of Distribución y Servicio
D&S S. A.
C2.
Furthermore, I represent that I do not have with the offeror any relationship
that could affect or influence on my opinion regarding the advisability of the
Offering, other than the one that derives from my capacity as a member of the
controlling group and from the fact that part of the shares under my control
shall be sold during the tender offer.
1
It takes
into account the following acquisitions: Acquisition of Wong by Cencosud (Peru,
12/16/07), of Gigante by Soriana (Mexico, 12/07/07), of GBarbosa by Cencosud
(Brazil 11/07/07), of CBD by Assai (Brazil 11/02/07) of Almacenes Éxito by
Casino (Colombia, 05/03/07), of Atacadao by Carrefour (Brazil, 04/23/07) and of
Carulla Vivero by Almacenes Éxito (Colombia, 08/22/06). Should we include the
merger of D&S with Falabella which, although agreed upon, was never
implemented, the sample mean would be 0.7x and 9.9x FV/Sales and FV/EBITDA,
respectively.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Santiago, Chile.
|
|
|
|
|
|
DISTRIBUCIÓN
Y SERVICIO D&S S.A.
|
|
|
|
|
|
By:
|
/s/ Alejandro
Droste B.
|
|
|
Alejandro
Droste B.
|
|
|
Chief
Financial Officer
|
Dated: January
14, 2009
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