When we met in London earlier in the month, Steinhoff CEO Markus Jooste confessed to having been congratulated more after walking away from two recent contested takeover bids than when he’d been successful. Investors were delighted, he said, that Steinhoff had shown a commitment financial discipline – not forgetting about value by getting caught up in the chase. Those who know Jooste realise there was never any danger of emotion trumping his logic. He is a binary thinker. True to his chartered accountant roots, whether its racehorses or companies, there is a definite price after which the deal no longer makes sense. So we can expect, Steinhoff won’t play fast or loose with a third proposed European takeover, this time for UK retailer Poundland. As it did with French retailer Darty Plc, Steinhoff has accumulated a sizeable chunk of Poundland stock which could be offloaded at a profit should another more generous bidder emerge. But this time the pieces seem to fit very nicely indeed. Poundland executives have done a lot of the hard work in rebranding the 99p Stores acquired last year. And this enlarged operation would fit snugly into Steinhoff’s Pep & Co outlets in the UK. The acquisition would also bring obvious procurement benefits, adding to the buying power of the group’s hefty Pep Stores in Africa. This time it looks like the planets are properly aligned. – Alec Hogg
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(Bloomberg) — Steinhoff International Holdings NV acquired almost a quarter of Poundland Group Plc’s shares as the South African company stages its latest attempt to buy a European retailer after twice being denied in recent months.
Steinhoff bought 22.78 percent of Poundland’s stock ahead of a possible all-cash offer for the U.K. discount retailer, the company said in a statement Wednesday. There’s no certainty an offer will be made, it said.
Poundland shares closed 2.2 percent higher at 200 pence in London, valuing the U.K. discount retailer at 537 million pounds ($761 million). That extended a 24 percent surge on Tuesday, when it emerged that private-equity firm Warburg Pincus had sold its 15.3 percent stake. Steinhoff could potentially bid about 250 pence a share, or 671 million pounds, and it’s unlikely other suitors will emerge, according to analysts at Peel Hunt.
Steinhoff, led by Chief Executive Officer Markus Jooste and South African billionaire Christo Wiese, has been foiled in attempts to buy two other European 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.
Steinhoff could combine Poundland with Pep & Co, its chain of 50 U.K. discount clothing stores set up by former Asda CEO Andy Bond, retail analysts at Exane BNP Paribas said in a note. Pep & Co plans to open as many as 15 new outlets later this year, it said in April.
“Poundland stores can be traded under their current banner with new product ranges, or could be converted into Steinhoff’s other banners,” the Exane analysts led by Graham Renwick said.
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Steinhoff shares rose 1.4 percent to 5 euros in Frankfurt.
The company 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.
For Poundland, the potential offer comes at a time when business is on a downward curve. Sales have been hurt 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.
‘Lost Faith’
“The market has lost faith in the Poundland story,” Peel Hunt analyst Jonathan Pritchard said. Poor sales have “led investors to question the entire model.”
Read also: Steinhoff earnings boosted by discount markets in Africa, Europe – up 67%
Poundland’s struggles and sub-par profitability could present an opportunity for an acquirer, though. “It would not take much in terms of central cost savings to create sufficient synergies to drive a good return from this acquisition,” Exane’s Renwick said.
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. The company is scheduled to report full-year earnings Thursday.
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. Poundland said there’s no certainty a firm offer will be made, and advised shareholders to take no action.
