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Battle of pound stores enters new phase

Poundland pays £55 million to snap up rival discount chain 99p Stores

PoundlandThe battle of the pound shops has entered a new phase with the Poundland chain acquiring its rival 99p Stores. The £55 million deal will see 251 shops, warehouse and distribution centre owned by the 99p Stores group join its bigger competitor.

Poundland will pay £47.5m in cash with an added £7.5m made up by a placing of new Poundland shares. The company said the combination of the two businesses “will provide better choice, value and service for 99p Stores’ customers”.

The 99p Stores’ network, some of which trade as Family Bargains, serve more than two million customers a week. In the year to 1 February 2014, 99p Stores had sales of £370.4, underlying EBITDA of £6.1m, gross assets of £91.2m and net assets of £11.2m.

The acquisition will required the approval of the Competition & Markets Authority. The two companies have already held discussions with the CMA and have accepted that it may demand Poundland make some concessions to ease competition worries.

The CMA will soon begin a public consultation and review that 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.

Poundland said in a statement to the London Stock Exchange: “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.

 It said further announcements will be made in due course.

 Jim McCarthy, chief executive of Poundland, 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.”

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