Fusion between Polar and ABCDin advances on right land

The best scenario is that in the middle of the month, the National Economic Prosecutor’s Office approves the merger between The Polar and ABCDinfrom the AD Retail group, with little or no mitigation measures, which could include, at most, the closure of some stores or conditions in dealings with certain suppliers that both brands had in common.

Since the body led by Jorge Grunberg announced on July 5 the start of an investigation into the operationfor complying with certain legal concentration requirements rather than for certain warning signs of lack of competition, say those familiar with the case, both companies are already preparing for Day Zero.

For this reason, after the investigation was opened, both boards of directors had to meet separately and extend the term to complete the merger for another 90 days, which was reported to the market this week in essential facts.

Several market players confirm that the FNE has requested information from other retail companies and brand representatives to get a more complete picture of the situation in the sector and how this merger would affect competition, both in the clothing retail business mainly in the case of La Polar, and household appliances and white goods in the case of ABC Din; as well as its financial businesses that are also merged.

According to what could be gathered, there are petit committees in each of the department stores, but they do not share information with each other in detail, until the FNE gives the go. Thus, for example, it has been established that the merged company will have a total of 90 stores, which means that around 20 locations must be closed or merged.

The detail of which will be closed or merged is not yet and will depend on what the anti-competition agency says regarding the distances of some stores that are very close to each other today. nonetheless, the numbers have already begun to be outlined so that, once approved, the decisions begin to be operationalized.

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On the side of La Polar, the teams are led by their general manager, Manuel Severín, and by ABCDin, his peer, Gonzalo Ceballos. While the shareholders, Leonidas Vial and the Santa Cruz family, have had no exchange of information. What should also be known soon is how the shareholders’ agreement between the two controllers will be, where it is estimated that the presidency will be held by an independent director and that both families will be represented equally at the table.

Of course, the one that could close more stores would be ABCDin, which has many more locations than La Polar. According to the 2022 reports, La Polar has 4,321 workers and 40 stores. While AD Retail has 1,702 employees and 73 stores.

The idea is also to do a kind of “pilot” in certain locations to test operational aspects of the merger. Until now, it has been informally discussed that it would be done in its own store in the center of Santiago and another inside a shopping center in the south of the Metropolitan region.

Another of the decisions that would be agreed upon would be to make all operational and systems efforts so that, As of November 1, the ballots are issued in the name of the new company and thus begin to simplify.

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There is still no clarity on which executive roles will be duplicated and who will remain in the merged company. An executive explains that it is understood that there will be layoffs or restructuring, and this has been conveyed by the top executives to the other employees. In stores the feeling is the same, and the unions have also conveyed that the companies recognize that not all will remain in the merged company.

Sources close to the process explain that what does exist today is a “coordination instance” to keep the workers of both chains informed regarding macro aspects, for example, the terms of the process with the FNE, the way to carry out the eventual transaction , among others. These areas are led by the human resources management of each company.

nonetheless, the same sources emphasize that the operational details of the merger have not yet been discussed in those instances, pending the FNE.

What did happen is that on March 20, an action and confidentiality protocol was signed, which allows the work teams or so-called “clean teams” to transfer sensitive information to the advisors of each company to carry out the corresponding due diligence. The names of these members are kept under absolute confidentiality.

Loca, the advertising agency

“Given the situation in which retail is in general and, in particular, the situation of both companies, the time factor is relevant. In this sense, the sooner the respective authorizations are obtained, time can be gained to generate the desired positive effect and give projection to the operation of this project”, explain sources familiar with the process.

For this reason, as in all these types of operations, an advertising agency was hired to analyze both brands, without yet involving aspects of the operation. And the chosen one was Loca Santiago.

The agency was founded in 2014 by Nicolás López Mujica together with Andrés Chateau, Sebastián Alvarado and Matías Montané. Among the brands they work with are WOM, Gato, Escudo, Limón Soda, Itaú, BHP and Omo, among others.

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In addition, they have an alliance with the Mashin agency, with which they operate internationally in Mexico, Argentina and Uruguay. This year they won a Gold Effie for a Lemon Soda campaign.

The agency’s job will be to analyze the values ​​of each brand and the reputational damage they may cause, in particular La Polar after the cases of counterfeit clothing and the illegal renegotiations of 2011. nonetheless, keeping only the ABCDin brand would not be optimal either, because said company is only related to electrical appliances and not clothing.

AD Retail is priced

What is already defined is the way in which the merger will take place. The department store run by Leonidas Vial was forced to carry out a capital increase, in which the shares will first be offered to its own shareholders and, later, the remainder of said papers will be offered to the shareholders of AD Retail.

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According to the shareholders’ minutes of May 31 of La Polar, point three of the table was to approve a capital increase of $34,976 million.

He also noticed a letter signed by Jaime Santa Cruz to the La Polar Shareholders’ Meeting, informing that the purchase price of AD Retail would be $16,038 million.

In other words, the use that will be given to the capital increase will be to pay the price of AD Retail, with the remainder, to cover the operational costs derived from the implementation of the agreement, which would be around $12 billion. While another $6,938 million will be used to prepay debt and strengthen the financial business.