Poundland sold to South Africa's Steinhoff in Brexit bargain

Poundland has yielded to a £597 million takeover bid by South Africa’s Steinhoff after last month’s Brexit vote heightened uncertainty for Britain’s under-pressure high streets.

Steinhoff, which owns UK furniture chains Bensons for Beds and Harveys and is nicknamed ‘Africa’s Ikea’, will pay 220p in cash for each Poundland share. This is a 40% premium to the discounter’s share price before talk of a deal emerged, but well below the 300p Poundland floated at in 2014.

Steinhoff first said it was considering an approach for Poundland on June 15, when it also hiked its stake in the company to around 23%, but was later rejected. It today paid £450 million for the rest of the retailer.

Poundland chairman Darren Shapland said that while last month’s Leave vote was not the “deciding factor”, it had boosted the appeal of a deal.

“We think it’s an attractive offer in terms of certainty and cash now versus the medium term value we could create in the next few years,” he said, noting the 15% decline in retail stocks since the European Union referendum.

Poundland shares jumped almost 13%, or 25p, to 221p as Liberum hailed the price as a “knock-out”.

The deal could also benefit Poundland shoppers, who could find cheaper products on shelves and greater choice thanks to Steinhoff’s global reach and sourcing capabilities, Shapland said.

That would be another blow to Britain’s supermarkets, already engaged in a fierce price war to fend off no-frills rivals Aldi and Lidl.

Shapland also sought to reassure Poundland staff, saying he was “not expecting any change” following the deal. “This is not a cost synergy deal.”

It was “absolutely the intention” to keep boss Kevin O’Byrne, who only took the helm this month, and the executive team, he added.

The deal follows Steinhoff’s failed pursuits of Argos owner Home Retail Group and electricals firm Darty. It has been looking for a way in to Europe, where squeezed consumers have been increasingly turning to low-cost retailers.

Boss Markus Jooste said: “Steinhoff is developing a fast-growing, price-led retail business across the UK and the rest of Europe. Poundland would be a complementary fit to this growth story.”

The group’s largest shareholder is tycoon Christo Wiese, who has also snapped up New Look, Virgin Active and a stake in Iceland through his investment vehicle Brait.

Poundland faces an uphill battle, however. Its shares have slumped by more than a third in the two years since it listed, as it failed to replicate its success on the back of the craze for loom bands - the plastic bands tied together to make bracelets.

In the last year its profits slumped 84% after its takeover of 99p Stores proved a distraction. It was subjected to a long investigation by the Competition and Markets Authority over the merger and was later forced to accelerate the conversion of its new business after finding it in a mess.