Dollarama acquires Dollarcity

Dollarama has entered into a definitive stock purchase agreement to acquire a 50.1 per cent interest in Latin American value retailer Dollarcity.

Dollarcity’s current store count is 180, including 44 in El Salvador, 54 in Guatamala and 82 in Colombia. The purchase agreement also covers Costa Rica, Ecuador, Honduras, Nicaragua, Panama and Peru. Dollarcity’s store opening target is currently around 40 per year, and the company expects to reach 600 stores by 2029, according to commentary by Brian Morrison and Meaghan Annett. Dollarama already has 180 stores in Latin America.

“Overall, in our view, this transaction is not surprising and we believe that it was widely anticipated by the market, although the timing is earlier than anticipated,” Morrison and Annett said. They believe Dollarcity offers Dollarama an additional source of growth as its Canadian business matures.

The transaction is valued at $111-124 million in Canadian dollars, with an upfront payment of $52 million upon closing and the remainder paid in the third quarter. It is expected to add 2-3 cents to Dollarama’s per-share earnings.

The transaction is expected to close in August.

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