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Poundland rejects Steinhoff offer amid Brexit jitters

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Brexit hits Poundland hard

Steinhoff has experienced another setback in its attempts to purchase a British discounter.

The South African retailer said on 24 June that Poundland, in which it had a 23% stake, had rejected a cash offer of an undisclosed sum for the other 77%. Steinhoff was tight-lipped but noted Poundlands’ poor results between March 2015 and April 2016.  Poundland’s chairman Darren Shapland reasonably described this year as “challenging”, with pre-tax profits falling by 83.7% to £5.9m (US$7.9m). This figure included the acquisition costs involved with purchasing competitor 99p Stores for £55m (US$73.7m) and converting its new shops. It now owns 600 stores, the vast majority of which are in the UK, and is currently worth around £500m (US$670m).

Steinhoff also pointed out the effect of “the recent movement in the share price of Poundland and the impact of the EU Referendum on global markets”. The forthcoming Brexit hit Poundland’s share price hard on June 24 and the wariness of making a British purchase now is understandable. The markets are jittery, with Jefferies’ James Grzinic and his team forecasting how “Brexit leaves the UK non-food space vulnerable to multiples contractions and major earnings cuts”, though there is a glimmer of sunshine in the report for Poundland getting a “Hold” recommendation.

Brexit will tarnish the UK’s appeal for Steinhoff, which failed to buy Home Retail Group (the owner of Argos) in March and withdrew from a takeover battle for the Paris-based Darty in April. It is possible that Steinhoff will come again at Poundland with a higher offer before July 13, when city takeover rules dictate it must give a firm offer or shuffle into the sunset and the widely-expected fall in Sterling presents opportunities to take advantages of currency moves.

This story first appeared on Acquisitions Daily, a leading publication that provides critical comment, analysis and statistics on every important issue in acquisitions, mergers and buyouts. Sign up here for a free trial.




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