Spanish retail group Distribuidora Internacional de Alimentación, S.A. (BME:DIA) will sell its Brazilian operations, which are considered loss-making and underperforming in the country, Valor has learned. Financial advisor Lazard Ltd. (NYSE:LAZ) has been hired to find an investor for the business. Talks are at an early stage.

Sources say the operation is likely to attract interest from private equity funds (which buy stakes in companies) and foreign groups. A person familiar with the matter does not see interest from large retailers operating in Brazil, such as GPA, owner of Pão de Açúcar, and Carrefour. The potential value of the deal has yet to be determined.

?It?s a transaction that will require a lot of money to be invested.? According to a person familiar with the matter, the Russian fund LetterOne, which took control of Grupo DIA in 2019 with a 74% stake, has cash flow problems in Europe and doesn?t want to put money into Brazil at a time when stores need to be renovated and the chain needs to grow in an organized way. Valor found that the controlling shareholders preferred to focus their efforts in Spain, where the chain was well established and the return on investment was faster.

The difference in how stores look like is striking. In Spain, the units are clean, bright, and well-stocked. In Brazil, small stores, even in upscale neighborhoods, are poorly maintained.

A recovery plan was put together in 2020, when the chain closed stores in Brazil and began to change the management team. In early 2022, when it was time to inject money to restructure stores, DIA?s global management said the focus was on the Spanish market. Lazard declined to comment.

In a note, DIA said that ?the group is currently focused on day-to-day operations to continue making progress in consolidating growth.? According to the parent company, the chain is ?continuously evaluating various strategic opportunities and has no news to report at this time.? The group ?will inform the market if a new strategic operation materializes?.