Poundland has agreed to snap up 99p Stores for £55m, enough to buy 55,555,556 items at its marginally cheaper rival. But before everyone starts debating the very important subject of how much things at the combined stores will cost there is one hurdle the discounters have to clear first – the competition regulator.
99p Stores has 251 shops that serve some 2 million customers a week, according to a stock market statement filed by Poundland. In the year to February 1 2014, 99p Stores’ underlying EBITDA was £6.1m on sales of £370.4m. Poundland’s sales from more than 500 stores were just shy of £1bn in the year to March 31 2014.
Poundland, then, is not only bigger (it now has around 600 shops) but better performing on a store-by-store basis too. Any deal, though, is conditional on what the Competition and Markets Authority thinks of it, and whether Poundland can stomach any demands the CMA makes to bless the union. Presumably, the CMA is concerned about any monopoly effects on suppliers and the bang customers are getting for their buck, rather than the buck itself.
‘We look forward to working with the CMA as it undertakes its review,’ Poundland’s chief executive Jim McCarthy said. Bet you are.
The discount store’s shares were up more than 10% to 394p this morning, a nice stamp of approval for the deal, especially given the rocky ride its had on the markets since it floated last March.
Credit: Yahoo Finance
Despite the volatility, McCarthy and co ploughed on, with sales up 15% to £528m in the six months to September and a trial of Dealz stores in Spain. It said today the test ‘could lead to further expansion in continental Europe’. The question, though, is whether items will cost 99 cents or €1?