South African conglomerate Steinhoff considering takeover bid for Poundland

Bloomberg, International Business Times and Mergermarket asked Harsha Wickremasinghe for his thoughts on Steinhoff’s unsolicited takeover bid for Poundland.< South Africa-based international retail holding company Steinhoff is considering a bid for discount retailer Poundland. In Bloomberg: "Whilst it may be struggling at present, there are plenty of positives surrounding Poundland. It has a platform which will provide it with formidable operational advantages in purchasing, and the results of international trials in Spain and Ireland are very encouraging. There is a significant market opportunity not only in the UK, but across Europe for it to capitalise on - and Steinhoff will not have missed this." Click here to read the full article.

In International Business Times:

Harsha Wickremasinghe, associate at international M&A advisory firm Livingstone, explained that Poundland has expanded rapidly to attract customers across the demographic spectrum.

“However, it would seem Poundland has bitten off more than it can chew with its acquisition of rival 99p stores. The integration has been troublesome.< “Steinhoff has been stalking the UK high street for some time looking for a target. It has seized the opportunity and cannily struck when Poundland appears to be floundering. There is a significant market opportunity not only in the UK, but across Europe for it to capitalise on – and Steinhoff will not have missed this.”

Click here to read the full article.

In Mergermarket:

Dollar Tree [NASDAQ:DLTR] and Dollar General [NYSE:DG] could join the fray in an attempt to crack the UK discount market. The two companies have access to capital and should take a long look at Poundland commented Harsha Wickremasinghe of Livingstone Partners. Dollar Tree declined to comment; Dollar General did not reply to a request for comment.

However, Dollar Tree’s interest could be tempered by its 2015 acquisition of US-based peer Family Dollar, Wickremasinghe said. Steinhoff is likely to be aware of this and its Poundland move may be timed accordingly. There are no obvious UK-based trade rivals at the moment, he added.

The target is coming off an accelerated conversion of the assets it acquired in the 99p Stores deal, requiring more capex this year than anticipated, said Wickremasinghe. The GBP 25m boost to EBITDA projected from last year’s merger is not set to take effect until 2017, he added. Poundland will publish a trading statement today, said a group spokesperson.

Assuming any proposed Steinhoff/Poundland merger could offer synergies, a cash-and-shares offer could be lower than an all-cash bid, Wickremasinghe said. The deal could pave the way for Poundland’s entry into the German market, he said.

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