07:10 AM EDT, 06/12/2024 (MT Newswires) -- Dollarama ( DLMAF ) said on Wednesday that it purchased an additional 10% of Latin American value retailer Dollarcity in exchange for about 6.1 million common shares of Dollarama ( DLMAF ).

Dollarama ( DLMAF ) now owns a 60% equity interest in Dollarcity and has an option to buy an additional 9.9% at any time by Dec. 31, 2027.

Also, Dollarama ( DLMAF ) and the Dollarcity founding stockholders have agreed on governance terms for the future expansion of the business to a new country, Mexico.

Dollarama ( DLMAF ) and the Dollarcity founding stockholders will indirectly have an 80% and 20% equity interest, respectively, in the Mexico portion of the business. Dollarcity plans to pilot its first store in Mexico in calendar 2026. Dollarama ( DLMAF ) is entitled to acquire a 4.9% equity interest in the Mexico partnership at any time by Dec. 31, 2027.

The transaction is expected to be neutral to Dollarama's ( DLMAF ) net earnings per share for the fiscal year 2025.

As at March 31, Dollarcity had 547 stores with 324 locations in Colombia, 99 in Guatemala, 72 in El Salvador, and 52 in Peru. Dollarcity's management has revised its long-term store target in these four current markets of operation to 1,050 stores by 2031, up from its previous target of 850 stores by 2029.

The increased target reflects expected growth mainly in Peru and Colombia and does not take into account any future expansion in Mexico, the company said.

Dollarama ( DLMAF ) will continue to have joint control over Dollarcity, including the Mexico partnership, and account for its investment as a joint arrangement using the equity method.