Five benefits from Poundland takeover approval

The Competition and Markets Authority (CMA) concluded that the single price retailer – which sells ambient food and drinks – would not have an incentive to reduce the quality of its offering, either at the local or at the national level.

Chair of the CMA inquiry group Philip Marsden said: “Both across its business and in individual areas, Poundland would continue to face competition from other value retailers. So, we don’t currently believe customers will face a reduction in choice, value or lower-quality service as a result of the merger.

“We have also seen in recent years the big four supermarkets engaging in intense price competition, some of which involving the promotion of £1 products. On the basis of the evidence to date, we do not think customers will be worse off from the merger.”

Mainly attracted to Poundland

Shoppers were mainly attracted to Poundland and 99p Stores because of their affordability and regarded them as good alternatives to each other, added Marsden. But some customers can and do switch to other types of discount retail chains.

Shore Capital said the ruling – which could create a combined network of about 800 UK stores – opened the way for Poundland to realise five key benefits.

Those were: accelerating Poundland’s growth in southern England and retail parks, with 99p Stores operating from about 120 stores in southern England and the 27 larger store estate. It would also boost the potential number of UK stores from the 1,000 to about 1,250, as stated by ceo Jim McCarthy at the preliminary results analysts meeting on June 18.

The takeover will enable Poundland both to consolidate its leading position in the discount market and ease pressure on future site acquisitions, said Shore Capital analysts Clive Black and Darren Shirley.

‘Open 60 net new stores’

“We believe Poundland remains on track to organically open 60 net new stores in the UK and Ireland in financial year 2016, with 40 net openings by the end of the first half, ahead of the important third quarter trading period,” they said.

The takeover was also likely to lead to stronger sales densities in the acquired stores and deliver a “material boost” to total group turnover.

Finally, the cost benefits achieved through the acquisition were likely to be re-invested to strengthen the customer offer and offer scope for sourcing benefits and cost savings over time.

“We see Poundland as a high quality retailer, operating in a discount channel which continues to offer structural growth across Great Britain and potentially on the European continental mainland,” concluded Shore Capital.

Meanwhile, anyone wishing to respond to the provisional findings should write to poundland.99p@cma.gsi.gov.uk by no later than 5pm on September 16 2015.