Poundland takeover agreed: Discount chain to be sold in £597 million deal

Poundland, founded by south Shropshire businessman Steve Smith, who sold his stake in 2000, accepted the 222p-a-share bid after rejecting a cash offer from Steinhoff last month for an undisclosed sum.

The deal comes after Steinhoff – which owns UK furniture firm Harveys and Bensons For Beds – recently lost out in a battle with Sainsbury's to buy Argos owner Home Retail Group in March and was outbid for London-listed white goods retailer Darty.

The sale price, which also includes a 2p-a-share final dividend on top of the 220p-a-share bid, marks around a 40 per cent premium to the value of Poundland's shares in mid-June.

It follows a hefty slump in Poundland's shares over the past year after tough trading and a difficult takeover of rival 99p Stores.

Poundland, which is headquartered in Willenhall near Wolverhampton, has branches in Shrewsbury, Oswestry, Telford and Welshpool. It employs around 18,000 staff in more than 900 stores.

Annual results recently laid bare Poundland's sales woes as underlying pre-tax profits fell 13.5 per cent to £37.8 million in the year to March 27, while bottom-line pre-tax profits crashed 83.7 per cent to £5.9 million, including converted 99p Stores.

Steinhoff had already built up a 23.6 per cent stake in Poundland in recent weeks as it stepped up its pursuit of the set-price retailer.

Darren Shapland, chairman of Poundland, said the deal gives investors an "opportunity to realise their shareholding at a certain and attractive price".

He said it achieved the share price value targeted under its turnaround plan earlier than could be expected "against a background of increasing economic uncertainty in the UK and a more challenging trading environment".

Steinhoff chief executive Markus Jooste said: "The board of Steinhoff and its management team are enthusiastic about the opportunities that this transaction brings: we believe that there is 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."

He added that management at Poundland would continue to play a "key role" after the takeover and said he looked forward to "welcoming" the chain's employees.

Steinhoff said it had no plans to change the group's head office or employment conditions for staff.

It marks an eventful start at the top for Poundland's new boss, Kevin O'Byrne, after he took the reins earlier this month.

The former B&Q UK and Ireland head took over from predecessor Jim McCarthy on July 1, having joined as chief executive-designate in April.

Retail analysts at Liberum said Steinhoff had offered a "knock-out price".

They added: "The recommended cash offer is a good result for Poundland shareholders and comes at a time when there was more downside risk than upside in our view."

Steinhoff has been determined to expand further across Europe, having tried and failed to gatecrash two deals in recent months.

It is backed by South African retail billionaire Christo Wiese, whose Brait investment group also owns controlling stakes in Virgin Active, New Look and food chain Iceland.

Steinhoff also owns Conforama in France, as well as a number of retailers across Europe, Australasia and Africa.