Steinhoff £597M Poundland Takeover

Steinhoff has completed a takeover of Poundland for £597 million. Steinhoff is a retail conglomerate from South Africa and owns Bensons for Beds and Harveys in the United Kingdom. Poundland has been struggling and recommended that the shareholders take the deal. Each of them will take away 220p for every share, including the dividend of 2p the discount retailer had announced for the last financial year ending March 27th, which was announced in June 2016.

Around June 15th, Steinhoff came out as the potential buyer of the struggling company and had to deal with a deadline to either walk away or make a bid immediately before the end of the day. Before the confirmation of the offer, the South African conglomerate had been growing its stake in Poundland. By July 12th, Steinhoff had a 23.6 percent ownership of the UK chain.

Accomplish turnaround goals

Poundland leadership announced that with the £597 million takeover, the discount retailer could turn the ambitions around much earlier than expected. This will happen against prevailing UK uncertainty following Brexit, including a challenging and competitive trading environment. Steinhoff boosts a well-capitalised global business with a proven and dedicated value retailing commitment. Steinhoff forms an appropriate and highly suitable partner who will cater for all stakeholders, including suppliers of Poundland. Considering Poundland’s expansion and growth goals, Steinhoff has excellent plans that augur well with the discount chain.

Billionaire takeover

Christo Wiese, a billionaire with a 17 percent stake in the takeover company, has shown a massive interest in owning part of the growing and expanding discount market in the UK. Wiese has stakes across the divide, right from New Look, a fashion chain, and Iceland, a supermarket chain, including diverse investments in the Virgin Active line of gyms. For its part, Steinhoff has been on the lookout to buy a retailer in Europe and lost the Home Retail Group buyout to Sainsbury’s. The company is also interested in Darty, a French retailer.

Steinhoff has indicated their trust in the current Poundland management, especially their value and strength in uncertain times in England. The South African conglomerate sees them as a critical component of the continuing development and growth of the discount retailer. It means Poundland employees will be assimilated into a prominent discount seller in a multi-format.

Poundland’s difficult times

The £597 million takeover comes at a very penultimate moment for the retail chain after its sales were reduced by its takeover of 99p Stores, a rival and a loss maker. At the same time, shoppers on the high street of Britain have been dwindling while facing an ongoing supermarket competition that has continued going up at a time when there’s a severe price war in action. In April 2016, the Chief Executive of Poundland, Kim McCarthy, stepped down, and a previous chief executive of B & O, known as Kevin O’Byrne, was slated to take over.

Now that the 99p Stores takeover has been concluded after the competition regulator’s half-a-year investigation, Poundland currently boasts 900 outlets across Ireland and the UK. At a time when an upside movement was challenging and a downside risk almost a reality, analysts believe the shareholders of Poundland have the best deal possible. On the other hand, Steinhoff could have made the best strategic move this year for the conglomerate, although diverse challenges lay ahead if they were to make the takeover successful.

Budding discount retailers

Steinhoff had shown interest in taking over Poundland before the Britain referendum to leave Europe. According to many analysts, the current acquisition seems like a very wise move. The UK has seen a lot of discount retailers thriving very well in the last few years, with consumer uncertainty and the downturn that came with Brexit playing into the hands of these retailers. Confidence in trading in the long term has been floated as the reason why Steinhoff went for Poundland as well as Brexit, which for a discount retailer it’s a good turn of events.

Steinhoff has 2,300 stores and sells various items, such as discount apparel and furniture. The Poundland takeover, nonetheless, is expected to leave several investors with some loss after its short public company profile ended. In March 2014, Poundland had listed at a share price of 300p, but the price fell to a low of 139p in February 2016.

It’s also possible that Pep & Co, Steinhoff’s 50 discount clothing chains in the UK, could be combined with Poundland. This is after Pep & Co indicated its desire to open around 15 new stores before the end of 2021. Poundland was advised by both Rothschild and JPMorgan Cazenove, while Steinhoff went for Investec advice.