Poundland agrees £55m deal to acquire rival chain 99p Stores

Hussein Lalani, son of founder Nadir Lalani, outside one of the familly's 99p Stores branches.

Hussein Lalani, son of founder Nadir Lalani, outside one of the familly's 99p Stores branches. - Credit: Archant

Discount retailer Poundland has agreed to buy rival chain 99p Stores in a cash and shares deal valued at £55million.

The family-run 99p Stores company, which was founded by Nadir Lalani with a single shop in Holloway, north London, in 2001, now operates 251 outlets, including some which trade under the Family Bargains brand.

Its sales totalled £370.4m in the year to February 1 last year and it reported underlying earnings of £6.1m.

Poundland, which floated on the stock market last year, will also acquire a warehouse and distribution centre as part of the transaction.

Its chief executive, Jim McCarthy, said: “This is a good deal for both businesses and will benefit customers and shareholders.

“Through working together, Poundland will improve choice, value and service for 99p Stores’ customers, bringing Poundland’s know-how and range to 99p Stores.”

By the end of 2001, Mr Lalani, helped by sons Hussein and Faisal, had opened three more stores and the chain’s growth has accellerated in recent years, assisted by the demise of Woolworths and the wider recession which has seen bargain retailers become a significant feature on UK high streets.

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Poundland, which describes itself as Europe’s largest single price value retailer, has opened nearly 600 stores in the UK, the Republic of Ireland and Spain since its launch in 1990, trading in the latter two countries under the Dealz brand.

It is paying £47.5m in cash for 99p Stores plus £7.5m in new shares, with the deal to be partly funded by a share placing.

Poundland said the deal was dependent on the approval of the Competition and Markets Authority (CMA) and talks with the regulator had already been held.

It is unclear what view the CMA will take on the proposed deal in terms of competition, given that the two chains sell such a wide range of products and also face competition from other, smaller, fixed price operators as well as more conventional retailers.

However, there is considerable overlap between the two companies’ store networks. In Ipswich, for example, both Poundland and 99p Stores have outlets in Carr Street, with Poundland also have second shop in the town, within the Tower Ramparts shopping centre.

The opening of the 99p Stores shop in October 2013 sparked a mini price war between fixed price stores in Carr Street, involving not only Poundland but also the Yippee its 99p store nextdoor.

Poundland also has two stores in Lowestoft, on the North Quay Retail Park and at the Britten Centre, while 99p Stores also trades in the town, in Commercial Road.

Both chains also operate in Colchester, Poundland in Long Wyre Street and 99p Stores in Culver Street East.

Elsewhere in Suffolk and north Essex, however, there is no duplication, with Poundland also having stores in Bury St Edmunds, Newmarket, Haverhill, Felixstowe and Chelmsford and 99p Stores in Sudbury, Clacton-on-Sea and Witham.