UK’s largest fixed-price discounter Poundland is bidding to take over its discount rival 99p Stores for £55 million. Poundland, which was floated in March last year at 300p a share and serves 5million customers a week, said it had signed a conditional deal to buy the rival chain for £55 million. This will consist of £47.5 million in cash and the issue of new Poundland shares worth £7.5million.
Poundland said that buying its rival - which sells similar products at a penny cheaper - would give better choice, value and service for 99p Stores’ customers. Discounters such as Poundland, Aldi and Lidl have been giving a stiff competition to traditional retailers, including Tesco and J Sainsbury, as consumer appetite for bargain buying increases.
The 99p Stores chain, which also trades as Family Bargains, owns 251 outlets and generated sales of £370.4m in the year to February 1. Poundland said that when the two businesses are merged, the “proposed transaction is expected to enhance earnings per share for Poundland’s shareholders”. 99P Stores was founded by Tanzania-born Nadir Lalani in 2001.
The purchase has to be approved by UK’s Competition and Markets Authority to become final. That process could take at least two months, Poundland said, adding that the two companies had already held discussions with the CMA. The deal would include buying the warehouse and distribution centre of 99p Stores.
Since 1990, Poundland has opened almost 600 shops in the UK, Ireland and Spain, and it plans to open 60 new shops a year for the next two years in the UK and Ireland. Jim McCarthy, chief executive of Poundland, said the Lalanis would retain some of their investment in the form of Poundland shares if the deal went through. “Whether the acquisition is completed or not, the board is committed to its existing proven growth strategy of store rollout in the UK and Ireland and in the further development of its trial in Spain, which could lead to further expansion in continental Europe,” said McCarthy.
