Poundland’s 99p Stores takeover given go-ahead

Poundland shares surged by 5.7 per cent to 349p following the announcement.

“This was in anticipation of the potentially substantial earnings enhancement arising from Poundland increasing the much inferior EBITDA margin achieved by 99p Stores”.

‘We continue to believe that the acquisition of 99p will be great for customers and for shareholders alike’.

The inquiry group found that as a result of the deal, there will only be a small overall increase in the proportion of areas in which Poundland faces no competitors and, at a national level, only a third of Poundland’s stores face competition from 99p. A previous investigation found that a merger of the two stores could mean a reduction in quality, fewer promotions or the closure of stores.

Independent analyst Nick Bubb added: “Better late than never, but it has taken an awfully long time for the penny to drop at the CMA about just how much competition Poundland and 99p Stores face from other value retailers”. Both retailers sell similar ranges of consumer goods, stationery, food and drink, and homeware. Announcing its initial findings in April, the CMA said competition was in doubt in 80 places where their stores overlapped and in another 12 locations where shop openings would cause them to compete soon.

Poundland chief executive Jim McCarthy said the latest news would benefit both customers and shareholders.

Poundland welcomed the ruling, which will bring the company’s portfolio of stores up to 800 and a step closer to its goal of 1000 in the UK. 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.

He concluded: “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”.

The watchdog said that it had realised that while only one major single-priced retailer, Poundworld, would remain after the deal, the merged company would still face competition from other discounters including B&M, Home Bargains, Wilko and Bargain Buys as well as supermarket chains including Tesco and Asda.