Poundland and 99p Stores deal under scrutiny

A merger of two of Britain’s biggest discount-retail chains faces an “in-depth” antitrust investigation unless the companies pledge to safeguard local competition, the U.K.’s Competition and Markets Authority said Thursday.

Poundland Group Plc agreed in February to buy 99p Stores Ltd. for 55 million pounds ($84 million) to boost its presence in the booming U.K. industry.

Yet in a preliminary examination the CMA said the deal “gives rise to a realistic prospect of a substantial lessening of competition in 80 local areas where the companies currently overlap –- and in a further 12 areas where they will be competitors in the near future.”

Poundland serves an average of 5 million customers a week from almost 600 outlets, while 99p Stores has more than 2 million weekly customers and about 250 stores.

The takeover shows the attraction of discount retailing in the U.K. as a growing number of shoppers switch to bargain stores with fixed prices. Poundland, which sold shares in an initial public offering last year, has said it sees potential for more than 1,000 stores in the U.K.

“After the transaction, Poundland will no longer face competition from its closest rival,” said Sheldon Mills, CMA senior director of mergers, adding that it was “unclear whether the constraint posed by remaining retailers is sufficiently strong to mitigate our concerns over how the transaction might affect choice, value and service for shoppers.”

Poundland declined 1.1 percent to 356.9 pence at 12:20 p.m. in London after falling as much as 5.6 percent when the CMA’s decision was announced. A Poundland spokesman was not immediately available to comment.

Source : James Boxell - Bloomberg
www.bloomberg.com/news/articles/2015-04-09/poundland-faces-in-depth-antitrust-probe-over-buying-99p-stores