Poundland takeover probe ridiculed as ‘mind-boggling’

POUNDLAND faces a full-blown investigation by the competition watchdog into its planned takeover of rival 99p Stores.

Yesterday the Competition and Markets Authority (CMA) warned the £55m deal could damage competition in areas where the two firms overlap, resulting in a poorer deal for customers.

But last night one leading analyst described the decision, which wiped more than £40m off Poundland’s market value, as ‘mind-boggling’.

Poundland and 99p Stores have 800 shops between them in the UK. Part of the rationale behind the deal is to close down some 99p Stores where there is a Poundland nearby.

The CMA said it has identified 80 areas where the firms overlap and 12 where they will become competitors in the near future.

It said the takeover will leave only one single price retailer with national scale – Poundworld – as a rival to Poundland.

It added: ‘The CMA found that the loss of competition between the companies may lead to a worsening of their offer locally, through a reduction in quality, fewer promotions or closure of their stores.’

Shares in Poundland, which soared 15pc on the day the deal was announced in February, slumped 4.5pc or 16.4p to 344.6p.

Poundland has until Thursday to find a solution to allay the CMA’s concerns – and could reverse the decision to close some 99p Stores where there is overlap. If it fails to do so, and presses ahead with the deal, the CMA will launch a ‘phase II’ probe, which will take up to 28 weeks to complete, and could even see it decide to block the takeover.

Clive Black, an analyst at Shore Capital, said the CMA’s move sounded ‘like a plot from political satire The Thick Of It’.

He added: ‘This is the stuff of the madhouse. It’s mind-boggling that the CMA can come to the conclusion that this deal distorts competition. Poundland is considerably stronger, faster and better than 99p Stores. Its shops are better.

‘Not allowing the deal to go ahead would penalise customers more than help them.’