Poundland cleared for takeover of 99p Stores
City Index August 26, 2015 2:36 PM
<p>The Competition and Markets Authority has completed a four-month review of the deal and granted provisional approval.</p>
Following a four-month review of the proposed £55 million Poundland takeover of 99p Stores, the Competition and Markets Authority (CMA) has granted provisional approval for the deal.
The watchdog says that there are enough value chains competing for customers to allow the deal.
They said that competition will not be damaged if Poundland were to buy 99p Stores, thereby creating an 800-store chain selling consumer goods, stationery, food and drink and homeware.
In a statement, the CMA said that both companies were each other's closest competitors, but other value retailers like Wilko and B&M, as well as supermarkets like Tesco and Asda, would provide plenty of competition. Customers, therefore, would not be harmed by less choice or Poundland reducing the value of its offers.
Following the CMA's statement on Tuesday (August 25th), shares in Poundland rose 5.7 per cent to 349p.
Competition from other value retailers
Philip Marsden, who chaired the CMA inquiry said that value retailers have seen a significant rise in prominence.
"Both across its business and in individual areas, Poundland would continue to face competition from other value retailers so we don't currently believe customers will face reduction in choice, value or lower-quality service as a result of the merger," he explained.
Mr Marsden also acknowledged that supermarkets would count among Poundland's competitors.
"We have also seen in recent years the big four supermarkets engaging in intense price competition, some of which involving the promotion of £1 products. On the basis of the evidence to date, we do not think customers will be worse off from the merger," he said.
Poundland chief executive Jim McCarthy said: We welcome the CMA's provisional clearance of our acquisition of 99p Stores and we look forward to a satisfactory conclusion to its phase two review. We continue to believe that the acquisition of 99p will be great for customers and shareholders alike."
Once Poundland has final approval from the CMA, the acquisition of 99p Stores will add 250 shops to the company's estate. Currently, Poundland operates around 600 UK outlets and the firm says it is working towards a target of 1,000 stores in the UK. It also has more than 40 shops in Ireland and nine in Spain under the Dealz brand.