JOHANNESBURG, June 15 (Reuters) – South Africa’s Steinhoff is considering making a takeover offer for Poundland, it said on Wednesday, sending shares in the British discount chain surging.
Steinhoff’s interest in Poundland is its third attempt to buy a European retailer after losing out to rivals in two separate battles for Britain’s Home Retail and France’s Darty earlier this year.
Under UK takeover rules, the $22 billion furniture conglomerate has until July 13 to announce a firm intention to bid for Poundland.
In an intial response, Poundland told its shareholders to take no action for the moment, noting that there was no certainty than an offer would be made.
By 0910 GMT, shares in Poundland were up 4 percent at 203.25 pence, their highest level since early January, valuing the company at more than 500 million pounds ($710 million).
Read also: Markus Jooste – On losing bids, building Steinhoff and drawing inspiration.
Steinhoff’s potential offer comes after U.S. private equity firm Warburg Pincus disclosed on Tuesday that it had sold down its stake and ahead of an annual earnings report from the company due on Thursday.
Warburg Pincus originally listed the discount retailer in March 2014 at a price of 300 pence per share.
The shares had been trading down 25 percent so far this year before the private equity firm sold its stake.
Poundland sells everything at the single price point of 1 pound in its British stores and also has operations in Ireland and Spain.
Sales growth has slowed, profits are expected to fall in its 2015-16 financial year and its purchase of rival 99p Stores for 55 million pounds in 2015 has proved problematic, raising questions over the durability of its single price model.
Steinhoff Mulls Poundland Bid in Latest European Retail Push
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(Bloomberg) — Steinhoff International Holdings NV said it’s considering an offer for Poundland Group Plc, the South African company’s latest attempt to further its European expansion after twice being denied in recent months.
The announcement was made without Poundland’s consent, Steinhoff said Wednesday, adding that it will provide an update in due course. Steinhoff has until 5 p.m. on July 13 to either announce its intention to make an offer or walk away, according to U.K. takeover rules. In a separate statement, Poundland said there’s no certainty a firm offer will be made, and advised its shareholders to take no action.
Poundland shares rose 6.6 percent to 208.75 pence at 9:08 a.m. in London, valuing the U.K. retailer at 562 million pounds ($797 million). They gained 24 percent on Tuesday, surging in late trading after it emerged that private-equity firm Warburg Pincus sold its entire 15.3 percent stake. The buyer’s identity has not yet been disclosed.
Steinhoff, led by Chief Executive Officer Markus Jooste and South African billionaire Christo Wiese, has been foiled in attempts to buy two other retailers this year. In March, it ditched its pursuit of Britain’s Home Retail Group Plc, allowing J Sainsbury Plc to win the owner of the Argos general-merchandise chain. The following month it abandoned a bid for French electronics retailer Darty Plc after a protracted duel with Groupe Fnac SA.
“It does seem like they are being incredibly opportunistic,” said Bryan Roberts, an analyst at TCC Global. “Poundland doesn’t tie in immediately with any of their existing businesses. With Argos and Darty there was a clear overlap in electronics and household products.”
Steinhoff is seeking to expand in Europe and challenge the likes of Sweden’s Ikea after moving its primary share listing to Frankfurt from Johannesburg in December. Founded in Germany by Bruno Steinhoff in 1964, it owns the Bensons for Beds chain in the U.K. along with French furniture retailer Conforama. The company employs 90,000 people and has more than 6,500 stores in 30 countries from the U.K. to Australia.
For Poundland, the potential offer comes at a time when business is on a downward curve. Sales have been affected by a surge in online shopping and a price war among the U.K.’s largest supermarket chains, while last year’s acquisition of the rival 99p Stores chain has also caused disruption. British retail industry veteran Kevin O’Byrne was named chief executive officer in March, and will take the reins July 1.
“Given the low margin at Poundland it would not take much in terms of central cost savings to create sufficient synergies to drive a good return from this acquisition,” Graham Renwick, an analyst at Exane BNP Paribas, said in a note.
Even after the recent share gains, Poundland stock is still about 30 percent below the 300 pence a share that investors paid in a 2014 initial public offering.
