Spain's High Court will investigate L1 Retail's bid for Madrid-based Distribuidora Internacional de Alimentación SA over concerns that Russian tycoon Mikhail Fridman acted to depress the supermarket chain's share price ahead of his bid for the retailer, Reuters reported Oct. 22, citing a court document.
L1 Retail, the retail division of Fridman's LetterOne Holdings SA fund, took control of DIA in May in a rescue bid that saw LetterOne own 70% of the Spanish retailer.
Reuters said DIA collapsed into insolvency after its market value sank 90% in 2018 amid growing competition.
The Supreme Court of Spain mandated the High Court to probe anonymous claims that said Fridman may have acted to manipulate prices, engaged in insider trading and damaged minority shareholders' interests in DIA, Reuters said, citing the court document.
The document reportedly included a police report alleging that Fridman coordinated with a network of companies to create short-term illiquidity in DIA and lower the company's stock price before he submitted his bid to take over the company.
When sought for comment, LetterOne denied the accusations, telling the news agency that the supermarket chain "has suffered from mismanagement and previously disclosed accounting irregularities that have negatively impacted all shareholders, including LetterOne."
"We have backed DIA and have committed to invest €1.6 billion to protect jobs and suppliers, keep stores open, and rescue this Spanish retailer," the investment firm reportedly added.
Shareholders of DIA on Oct. 22 also met and approved a capital increase, part of which will be used to repay the company's loan from LetterOne.
Separately, Fridman appeared in court in Madrid Oct. 21 as part of an investigation into the bankruptcy of digital entertainment company Zed Worldwide SA, Reuters said.
Fridman reportedly denied all charges in the Zed case.
DIA's stock closed down 7.03% to 41 euro cents in Madrid.