13th Jul 2016 13:28
LONDON (Alliance News) - Discount retailer Poundland Group PLC on Wednesday said it has reached an agreement with South African furniture retailer Steinhoff International Holdings NV for Steinhoff to buy Poundland.
Under the terms of the offer, Poundland shareholders will receive 222 pence in cash for each Poundland share, comprising 220p in cash per share and Poundland's final dividend of 2p per share for its financial year ended March 27.
Shares in Poundland were trading up 12.6% at 220.75p on Wednesday afternoon.
The offer price values Poundland at approximately GBP597 million, and represents a premium of 40% to Poundland's 158.25p closing price on June 13, which was the last business day before Steinhoff first bought Poundland shares, and a premium of 13% to Poundland's 196p closing price on Tuesday.
Steinhoff currently owns 24% of Poundland, through the acquisition of 63.5 million shares. It plans to buy the remainder of Poundland through its European business Steinhoff Europe AG, or one of Steinhoff Europe's wholly-owned subsidiaries.
Poundland said it will benefit from being part of a larger diversified retail group when taking into consideration factors such as the uncertainty faced by the UK's decision to leave the EU, tough current market conditions, and the likely time required for Poundland to improve performance and achieve its strategy.
It noted that while its acquisition of 99p Stores last year strengthened its position in the discount market, it also placed significant strain on the core business. This, compounded by increased competition, falling high street footfall and changing consumer shopping behaviour, has hit Poundland's performance in recent times.
Poundland's financial year to March 27 was a volatile one for the company, peppered with profit warnings and ongoing concerns about its sales performance and which culminated, in March, with the group being demoted from the FTSE 250.
Pretax profit in the year dropped to GBP5.9 million from GBP36.2 million the year before, as the costs associated with the 99p Stores acquisition, including converting those stores into Poundland stores, hit profit by GBP25 million.
Total sales rose to GBP1.33 billion from GBP1.12 billion, benefiting from the contribution from 99p Stores to the tune of GBP146 million, but like-for-like sales, which exclude any contribution from 99p Stores, decreased by 3.9% for the year.
Steinhoff has received irrevocable undertakings from each of the Poundland directors to vote in favour of the acquisition, in respect of 14.7 million Poundland shares representing 5.5% of its issued share capital. Poundland said its directors recommend unanimously that shareholders also vote in favour of the acquisition.
"The Poundland board believes that SEAG's all-cash offer presents Poundland shareholders with an opportunity to realise their shareholding at a certain and attractive price, securing earlier delivery of the Poundland Group's medium term value than could be expected from the ongoing turnaround process against a background of increasing economic uncertainty in the UK and a more challenging trading environment," Chairman Darren Shapland said in a statement.
"Steinhoff is a well-capitalised, international business with a clear and proven commitment to value retailing. They share our vision for the growth and expansion of Poundland and, as such, we believe they are a suitable and appropriate partner for our colleagues, our suppliers and stakeholders," he added.
Liberum said it views the 222p cash offer for Poundland as "highly attractive" and advises shareholders to accept.
"In our view this is a knock-out price and it was our view that significant downside risk existed if a bid did not materialise," the broker said.
Steinhoff manufactures, sources and sells furniture, household goods and general merchandise in Europe, Africa and Australasia. It owns the Benson for Beds and Harveys retail chains in the UK.
Wednesday's news comes after Poundland previously rejected a proposal from Steinhoff to make a possible cash offer for the company last month. Details of the possible offer were not disclosed, nor were Poundland's reasons for rejecting the proposal.
Prior to this, Steinhoff had already made two unsuccessful attempts to acquire UK-listed retail businesses. It was outbid by France's Groupe Fnac SA for Darty PLC, the electricals retailer, and lost out to grocer J Sainsbury PLC in the race to buy Home Retail Group PLC, the owner of digital and catalogue retailer Argos.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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