South African retail giant Steinhoff looks to have finally secured a major European target this year with its swoop for Poundland set to go ahead.
After missing out on Argos and Darty, Steinhoff, which already boasts 30 retail brands in 20 countries, has had a 220p a share offer accepted by Poundland’s board.
But what are the South African firm’s plans likely to be for the 900-plus-strong chain? And what impact will it have on the wider value sector?
Steinhoff already has a presence in the UK value sector in the form of its fashion chain Pep & Co and newly-launched variety chain Guess How Much! And the Poundland move offers opportunities for Steinhoff to ramp up the footprint of these fascias.
In areas where there is an overlap between Poundland and 99p Stores, one of the two could be converted to a Pep & Co, believes Peel Hunt analyst Jonathan Pritchard.
In addition, Pritchard says he would “not be surprised if we saw some Pep and Co product in Poundland stores”.
HSBC analyst Andrew Porteous agrees. “Steinhoff may use the (Poundland) estate to roll out its existing discount formats,” he says.
It remains to be see how, if at all, Guess How Much! will dovetail with the Poundland estate.
But with former Asda boss, Andy Bond, overseeing Steinhoff’s UK interests the focus on grocery could increase. With a grocery price war still raging among the Big Four this would make for an intriguing prospect. “A broader increase in grocery competition … is a serious consideration,” says Porteous.
Steinhoff’s move for Poundland will also be keenly watched by other value variety retailers.
“Steinhoff is clearly a larger, better capitalised business (than Poundland) with strong expertise in operating value-led formats,” says Porteous. “In this sense the takeover would be a step up in competition.”
Steinhoff is also likely to push to “take our costs, improve product ranges and accelerate store openings”, according to Credit Suisse analyst Pradeep Pratti.
However the distraction of the deal could mean Poundland’s rivals pounce. Poundland took its eye off the ball last year with the takeover of 99p Stores and some analysts believe this could happen again.
“Whilst the Steinhoff takeover is a different moment for Poundland, it brings confusion and that does not tend to bring strong trading,” said Pritchard.
“There is an opportunity for the other discounters to win share before Steinhoff gets its hands on Poundland and we think the chief beneficiary will be B&M.”
As Liberum analyst Wayne Brown notes B&M has a “superior disruptive multi-price model which should in a period of uncertainty lead to out-performance”.
Steinhoff has yet to say anything formally on its plans for Poundland beyond a commitment to retain its workforce and headquarters. However, the South African giant is expected to reveal next week more details of its plans for the business.