Johannesburg - South African-based retailing holding company Steinhoff International yesterday acquired European discount retailer, Poundland for £597 million (R11.4 billion).
It was third time lucky for Steinhoff after two previous attempts to strengthen its foothold in Europe failed earlier this year.
In March, the Frankfurt- and Johannesburg-listed retailer decided against pursuing general merchandise chain Home Retail Group.
Steinhoff also pulled out of a bidding price war with rival French retailer Groupe Fnac for French electronics retailer Darty a month later.
Steinhoff said that it would pay 222 pence for each share in Poundland.
The cash price represents a premium of 40.3 percent to Poundland’s share price of 158.25 pence on June 13 this year, which was the day before Steinhoff’s first acquisition of shares in Poundland.
The offer is also a 13.3 percent premium to Poundland’s share price of 196 pence on Tuesday.
Steinhoff’s acquisition of a minority stake in Poundland last month sent Poundland’s shares soaring as speculation became rife that the retailer could be a target of Steinhoff’s acquisition.
Steinhoff later confirmed it was considering a takeover.
Prior to yesterday’s announcement, Steinhoff had built up a 23.6 percent stake in Poundland.
The offer comes against the backdrop of uncertainty as British companies consider the consequences of the UK’s decision to exit the EU.
Poundland has accepted Steinhoff’s offer.
“The Poundland directors, who have been so advised by JPMorgan Cazenove and Rothschild as to the financial terms of the offer, consider the terms of the offer to be fair and reasonable,” Steinhoff said.
Attractive price
The offer was expected to be effective by mid-September this year, Steinhoff said.
Poundland chairman Darren Shapland said the cash offer presented 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”.
“The single-price sector has undergone significant modernisation and professionalisation in recent years and is now a mainstream feature of UK retail,” he added.
“Through the hard work and dedication of our many thousands of talented colleagues, Poundland has played a pivotal role in that transformation. Steinhoff is a well-capitalised, international business with a clear and proven commitment to value retailing,” Shapland said.
“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 said.
Steinhoff chief executive, Markus Jooste described the deal as “significant merit” in bringing Poundland into Steinhoff’s global network.
“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.”
ETX Capital markets analyst Neil Wilson said the acquisition was a “pretty good bargain” for Steinhoff.
“The weak pound makes this all the more attractive for the South African retailer – sterling has fallen around 20 percent against the rand this year. Expanding its operations in Europe should act as a useful hedge against rand volatility and exposure to South Africa’s stagnant economy.
“Poundland has been struggling with its costly acquisition of 99p Stores, its UK rival in the hyper discount sector and the share price fell enough to make it a juicy target for Steinhoff, which has twice failed to get its hands on a European retailer,” Wilson said.
Steinhoff shares rose 0.33 percent on the JSE yesterday to close at R85.27.
BUSINESS REPORT