Member Article

Poundland propose £55 million acquisition of 99p Stores Ltd

Poundland Group plc, Europe’s leading single price general merchandise retailer and 99p Stores Ltd, are pleased to announce that they have signed a conditional sale and purchase agreement for Poundland to acquire 99p Stores for an enterprise value of £55 million, comprising a cash consideration of £47.5 million and the issue of new Poundland Shares with a value of £7.5m at closing.

Poundland believes that the combination of the two businesses will provide better choice, value and service for 99p Stores’ customers.

The proposed transaction includes 99p Stores’ network of 251 stores (trading as ‘99p Stores’ and ‘Family Bargains’), which serve more than two million customers a week, as well as its warehouse and distribution centre. In the year to 1 February 2014, 99p Stores had sales of £370.4 million, Underlying EBITDA of £6.1 million, gross assets of £91.2 million and net assets of £11.2 million.

When the two businesses are fully integrated, the proposed transaction is expected to enhance earnings per share for Poundland’s shareholders.

The cash consideration of £47.5 million and the cash costs associated with the integration and restructuring of 99p Stores will be funded by an equity placing to be undertaken at or immediately prior to the closing of the Transaction and an increase in Poundland’s revolving credit facilities, reflecting its focus on preserving a conservative financial profile to support the capital investment plans in its business.

The acquisition is conditional on the approval of the Competition & Markets Authority (“CMA”). Given the size of the two companies, the CMA will review the proposed transaction and Poundland and 99p Stores have already held discussions with the CMA regarding the proposed transaction.

The CMA may require Poundland to take actions or give remedies to address any impact on competition arising as a result of the proposed transaction. The CMA will commence its public consultation and review process shortly and this process is expected to take at least two months.

The proposed transaction is conditional on an outcome of this CMA process that is acceptable to Poundland and to the CMA.

Whether the Acquisition is completed or not, the Board is committed to its existing proven growth strategy of store rollout in the UK & Ireland and in the further development of its trial in Spain, which could lead to further expansion in continental Europe.

When combined with the Group’s strong cash flow, the Board is convinced that, with or without the Acquisition, the Group is well-placed to build strongly on its proven track record and successful stock market debut.

Chief Executive of Poundland, Jim McCarthy, said: “This is a good deal for both businesses and will benefit customers and shareholders. Through working together, Poundland will improve choice, value and service for 99p Stores’ customers, bringing Poundland’s proven know-how and range to 99p Stores.

“We also believe that we can improve the performance of the 99p Stores estate and generate further value for Poundland’s shareholders. We look forward to working with the CMA as it undertakes its review.”