Retailer Poundland snubs cash bid from South African suitor

Discount retailer Poundland has rejected South African suitor Steinhoff's potential offer for the company.

Poundland posted a slump in annual profits after a challenging but transformative year. Picture: PA

Steinhoff had bought a 23 per cent stake in Poundland and was considering a bid but in a statement yesterday it said its proposal had been turned down by the board.

It said it would now consider its position taking account of latest results for Poundland and the impact of the referendum vote.

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“The board of Steinhoff notes the full-year results for the year ended 27 March, 2016 released by Poundland on 16 June, the recent movement in the share price of Poundland and the impact of the EU referendum on global markets,” it said.

“The board of Steinhoff is considering its position and a further announcement will be made in due course.”

David Stoddart, analyst at Edison Investment Research, said Steinhoff’s statement gives it the option to come back with a higher offer for Poundland.

“This will hinge on how they are funding the transaction – if the finance is in sterling, nothing changes, but if not, following yesterday’s sharp fall in the pound Steinhoff will enjoy greater room for manoeuvre and we would not be surprised to see it return with a more attractive offer, the cost of which may be mitigated by currency moves.”

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

Earlier this month, Poundland posted a slump in annual profits after a “challenging but transformative” year. Steinhoff’s bid interest comes after a testing time for Poundland, which had seen its shares fall by a third in a year following tough trading and a difficult takeover of rival 99p Stores.

Annual results laid bare the group’s sales woes as underlying pre-tax profits fell 13.5 per cent to £37.8 million in the year to 27 March. Bottom-line pre-tax profits crashed 83.7 per cent to £5.9m, but this includes converted 99p Stores. Poundland had advised shareholders to “take no action” after Steinhoff’s announcement that it is considering a bid.

The move is the latest takeover attempt by Steinhoff, after it lost out to Sainsbury’s to buy Argos owner Home Retail Group in March and was outbid for London-listed white goods retailer Darty.