The Home Retail Group rejected Steinhoff in March and chose to go with an offer from Sainsbury’s. Steinhoff’s attempt to buy French retailer Darty also came to naught after the Darty board recommended shareholders accept an offer from Fnac.
Poundland was attempt number three. The single-price retailer rebuffed an offer of an undisclosed amount from Steinhoff in June, but seemingly had a change of heart following developments in the UK economy.
In a statement on Wednesday, Poundland’s board said it had accepted a £2.22 per share offer, which translates to a 13% premium on the £1.95 the London-listed company’s closing share price on Tuesday.
The total offer is also a 40% premium on the discount retailer’s closing share price on June 13 — before Steinhoff presented its initial offer to the company.
Poundland, which recently bought another discount UK retailer, 99p Stores, said it considered the terms of the offer to be "fair and reasonable".
The retailer has appointed JP Morgan Cazenove and Rothschild as transaction advisers.
Steinhoff, which listed in Frankfurt in 2015, wants to expand further into Europe, where it already generates 60% of its revenue. The group has more than R60bn at its disposal to fund acquisitions there.
Exane BNP analyst Georgios Pilakoutas said Steinhoff was seeking to exploit the growth potential in the UK discount market, which was "under-represented". Pilakoutas said Steinhoff, through is general merchandise division Pepkor, had already launched two discount concepts in the UK — Pep&Co, an apparel discounter; and Guess How Much, a general merchandise discounter.
"These are in trial phase and subscale, but are both complementary to both Poundland’s store footprint and target consumer. An acquisition of Poundland would give Steinhoff immediate scale in the UK discount market and, therefore, looks to be a sensible acquisition in this context," he said.
Poundland is the largest single-price general merchandise value retailer in Europe, by both sales and number of stores. It operates more than 850 outlets across the UK, and 51 in Ireland, with a further 10 as part of a trial development in Spain. Steinhoff would be able to tap into these markets, where Poundland operates under the Dealz banner.
Currency fluctuations as a result of the recent Brexit vote may have made it cheaper for the company headed by Markus Jooste — which already owns 23.6% of Poundland — to acquire the remaining share capital. Post-Brexit, the pound has weakened to 31-year lows against the US dollar.
Jooste assured Poundland’s management and staff they would keep their jobs.
"Steinhoff recognises the strength and value of the Poundland management team and anticipates that they will play a key role in the ongoing growth and development of Poundland as part of the Steinhoff group."
