Poundland gets final clearance for 99p Stores takeover

The Guardian are reporting that the ruling by the Competition and Markets Authority gives Poundland the all-clear to complete the takeover more than six months after it was announced.

The CMA surprised many in the retail sector in April when it said the deal could reduce competition in more than 90 locations, suggesting Poundland would have to scrap stores in those places. Both retailers sell similar ranges of consumer goods, stationery, food, drink and homeware.

But the CMA changed its mind in August after conducting a survey of 5,000 customers and examining the companies’ internal data. It accepted that low-price retailing had taken hold in the UK and that the combined company would meet competition from Poundworld, Wilko, B&M and other value chains, as well as Tesco and Asda among the supermarkets.

Announcing its final decision, the CMA said: “Along with Poundworld, the companies are each other’s closest competitors but after the merger they will still face competition. The CMA has concluded that the merger may not be expected to result in a substantial lessening of competition. Consequently, customers would not face a reduction in choice, value or quality of service as a result of the merger.”

The ruling is a victory for Poundland, which was undeterred by the lengthy and costly inquiry and whose arguments the CMA accepted. Poundland told the CMA that the rise of low-price retailing, the expansion plans of its rivals, and supermarkets introducing their own £1 offers meant it would have strong competition.

Jim McCarthy, the chief executive of Poundland, said: “We welcome the CMA’s decision to clear the merger. We believe that the acquisition of 99p Stores will be great for both customers and shareholders and we will now move to completion by the end of the month.”

The recession and years of falling real wages after the financial crisis turned British shoppers into bargain hunters and fuelled the rise of single-price retailers, low-price grocers Aldi and Lidl and other chains offering everyday deals. The embattled supermarkets have been forced to respond by cutting prices and closing stores.

McCarthy said Poundland would set out its plans for 99p Stores with its half-year results in November. He has already said 99p Stores will be rebranded as Poundland, resulting in a 1p per item price rise for regular shoppers at the acquired company.

The acquisition, announced in February, will add 250 extra shops to Poundland’s estate of about 600 British outlets, accelerating progress towards a target of 1,000 stores in the UK. The company, which topped sales of £1bn this year, also has more than 40 Irish stores and nine in Spain under the Dealz brand.