Poundland gets green light for 99p Stores deal

Although, if Poundland change 99p Stores prices, then everyone stands to be at least 1p worse off on things like plant pots, German biscuits and dry shampoo.

The Competition and Markets Authority (CMA) undertook a lengthy review of the deal, announced in February, on concerns it could lessen competition in certain areas through a possible reduction in quality, fewer promotions or closure of stores.

The decision means that the £55 million takeover should be able to complete without further delay.

New Poundland shops are set to pop up across the region after the budget chain was given the green light to forge ahead with a £55m acquisition of its rival, 99p Stores.

“We have also seen in recent years the “Big Four” supermarkets engaging in intense price competition, some of which involves the promotion of £1 products”.

The CMA said the two companies, along with Poundworld, were each other’s closest competitors but that the combined business would still experience strong competition from Wilko, B&M and other value retailers, as well as Tesco and Asda among the supermarkets.

Poundland already has branches in Feltham, Uxbridge, Hounslow and Twickenham, while 99p Stores are located in West Ealing, Hayes, Southall, Hounslow, Acton, Wembley and Harrow. “On the basis of the evidence to date, we do not think customers will be worse off from the merger”.

McCarthy said: “We welcome the CMA’s provisional clearance of our acquisition of 99p Stores”.

The company is anyway on track to organically open 60 net new store in the UK and Ireland in the 2016 financial year, with 40 net openings by the end of the first half.

House broker Shore Capital welcomed the deal for its potential to materially accelerate Poundland’s growth in Southern England and retail parks but left forecasts unchanged for now.

“Poundland will both consolidate its leading position in the discount market whilst potentially easing some pressure on future site acquisitions”.

“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. Currently, Poundland operates around 600 UK outlets and the firm says it is working towards a target of 1,000 stores in the UK.