13-Apr-2015

Poundland boss 'disappointed and surprised' by 99p Stores ruling

 

The £55m deal between Poundland and 99p Stores is under threat after Competition and Markets Authority raised concerns about 92 stores

 

       
 
       
 
       
 
       
 
       
 
       
Poundland boss 'disappointed and surprised' by 99p Stores ruling
Poundland shares have fallen almost 10pc since the CMA revealed it had concerns about the £55m takeover of 99p Stores 
Photo: VisualMedia

The chief executive of Poundland has said he is “disappointed and surprised” by the competition regulators’ call for a full-scale review of the retailer’s £55m takeover of rival 99p Stores.

 

In his first public comments since the Competition and Markets Authority controversially intervened on the deal, Jim McCarthy told the Telegraph that Poundland is considering “what we do next”.

 

Mr McCarthy’s declined to rule out the prospect that Poundland pulling out of the deal for 99p Stores, with the chief executive insisting: “It is not as though we are short of opportunities.”

 

The CMA has said it has competition concerns about 92 of the 99p Stores, including 12 where Poundland is due to open nearby in the near future. These stores account for more than a third of 99p Stores.

 

The ruling means that Poundland must either agree to sell-off the stores in question, contest the CMA decision through a so-called “phase two investigation” that will last five months, or pull out of the takeover.

 

Shares in Poundland have fallen 9pc since the CMA revealed its concerns about the deal last Thursday.

 

The company has been given until this Thursday to make a decision. It is also due to update the City on recent trading on Tuesday.

 

Poundland is understood to be particularly frustrated that the CMA considered the deal on the basis that the retailer’s rivals only main rival was Poundworld and its other competitors were B&M, Home Bargains, Wilko and Poundstretcher.

 

The retailer, which has been credited with revolutionising the rag trade, believes it competes against a wide collection of retailers, including the major supermarket chains.

 

Mr McCarthy said: “I am disappointed and surprised, because my view is thatwe operate in a very competitive and changing retail environment.

 

“They have made a decision, we have to think about that now and what we do next.

 

“Before our board and advisers can form an overall view, we really have to give some quality time to thinking it through. We have got a lot of business to do, a lot of opportunities. It is not as though we are short of opportunities.”

 

Poundland boss Jim McCarthy

 

When asked whether the deal was under threat, Mr McCarthy said: “The CMA have given their verdict on this 'phase one’. Our job now is to consider what they have said, all the detail behind it, and then as businesses we will decide what is right going forward.”

 

Mr McCarthy said Poundland was competing with “everybody” and only accounted for 0.3pc of spending on groceries in the UK.

 

The Poundland boss said the tie-up with 99p Stores offered the opportunity to reach its target of opening 1,000 stores quicker than initially expected and “made sense to us”.

 

City analysts have been scathing of the CMA’s intervention. Clive Black, analyst at Poundland’s house broker Shore Capital, said: “If it wasn’t so serious it could be funny.”

 

The CMA warned the deal threatens the “choice, value and service for shoppers”.

 

Sheldon Mills, the senior director of mergers at the CMA, said: “Without competition from 99p Stores, there is the possibility that Poundland may have the incentive and ability to deteriorate its offer in these areas to the disadvantage of customers.”

 

 

By Graham Ruddick - Telegraph