Willenhall-based Poundland’s bid to by rival discount store chain 99p Stores has been given the provisional go-ahead by the UK Competition and Markets Authority (CMA).
Publishing its preliminary findings into its phase two review of the proposed acquisition, the CMA ruled the deal “may not be expected to result in a substantial lessening of competition” and as a result said it had provisionally cleared it.
The acquisition is likely to be rubber-stamped in October leading to 99p Stores’ 251 outlets being rebranded as Poundland in one fell swoop.
Poundland unveiled plans to buy 99p Stores in a £55 million cash and shares deal in February this year.
In response to the CMA’s announcement Jim McCarthy, chief executive of Poundland, said: “We welcome the CMA’s provisional clearance of our acquisition of 99p Stores and we look forward to a satisfactory conclusion to its phase two review.
“We continue to believe that the acquisition of 99p will be great for customers and for shareholders alike.”
99p Stores was founded by Nadir Lalani with a single site in Holloway, north London, in 2001, helped by sons Hussein and Faisal, before opening a further three stores later that year.
It has grown rapidly in recent years following the demise of Woolworths in 2008 as bargain retailers have become regular fixtures in UK high streets.
99p Stores outlets trade as both 99p Stores and Family Bargains and serve more than two million customers.
Annual sales were £370.4 million in the year to February 1, 2014 and underlying earnings were £6.1 million.
Poundland, which floated on the stock market last year, will also pick up a warehouse and distribution centre in the transaction.
Poundland is set to pay £47.5 million in cash plus £7.5 million in new shares. The deal will be partly funded by a share placing.
Speaking to the Post in May at the time of Poundland’s 25th anniversary, Mr McCarthy predicted the business would still be going strong after 50 years.
Poundland, which was founded in 1990 and now has 600 stores, grew out of a market stall in Bilston run by founder Steve Smith.
Last year it saw growth of between 13 and 14 per cent, opening around 60 stores and creating 2,000 jobs. Its total turnover was £1.1 billion.
It has also expanded its operations beyond the shores of the UK with its Dealz chain in the Republic of Ireland and less than a year ago it launched in Spain, where it now has six stores.
The 99p Stores deal would see Poundland revise its estimated UK store capacity up from around 1,000 to 1,450 stores.
Speaking about the deal in June Mr McCarthy said: “We certainly believe it is in the interests of our customers.
“Javelin Strategy & Research has already told us we could trade from well over 1,000 Poundland stores in the UK.
“If the CMA approves the 99p Stores acquisition that adds in growth for 99p Stores, so Poundland could then go up to 1,450.
“That gives ten further years of growth in the UK.”