Poundland’s proposed purchase of discount rival 99p Stores is set to go ahead after the antitrust watchdog backed off from a finding the merger might reduce choice on the British high street and cleared the deal.
Poundland has opened about 600 stores since 1990 in the UK, Ireland and Spain and plans to launch 60 shops annually over the next two years in the UK and Ireland.
The decision draws a line under months of uncertainty for Poundland since it signed a deal to buy its rival for an enterprise value of £55 million in February, claiming it would provide discount shoppers with better choice, value and service.
Two months later, the Competition and Markets Authority (CMA) launched an in-depth inquiry, concerned the merger would reduce competition. It was particularly concerned about 80 local areas where the two companies have competing stores and 12 areas where they would be future competitors.
However, yesterday the CMA said in its preliminary findings the deal “may not be expected to result in a substantial lessening of competition”.
“Consequently, customers would not face a reduction in choice, value or lower-quality service as a result of the merger,” the CMA said, in giving the deal provisional clearance.
Final approval is expected in October.The CMA found that, along with Poundworld, the companies are each other's closest competitors but, post-merger, they would still face competition from other value retailers such as B&M, Home Bargains, Wilko and Bargain Buys, along with Tesco and Asda.
The regulator said Poundland “would not have an incentive to reduce the quality of its offering, either at the local or at the national level,” explaining that Poundland and 99p Stores set the same retail offer at each of its stores.Buying 99p Stores will help Poundland expand to its 1,000-store target more quickly, the company said. – (The Financial Times Ltd)
