Steinhoff says considering bid for Poundland

South African-based Steinhoff International confirmed on Wednesday that it is considering a possible offer for the entire issued share capital of London-listed discount retailer Poundland.

Steinhoff said the announcement had been made without the consent of Poundland, adding that a further announcement will be made when appropriate and in due course.

Steinhoff was recently engaged in a bidding battle with Fnac over French electricals retailer Darty.

When it came down to it, Steinhoff decided not to raise its 160p-a-share offer for Darty, saying it would “no longer create sufficient value”. This paved the way for Fnac, whose 170p-a-share offer was accepted.

Before that, Steinhoff had been competing with Sainsbury’s to buy Argos owner Home Retail Group, but pulled out of plans to make a bid.

Poundland released a statement in response to Steinhoff’s, advising its shareholders to take no action and saying it will issue a further statement if and when appropriate.

“There can be no certainty that a firm offer will be made, nor as to the terms on which any firm offer might be made. This announcement is being made by Poundland without the prior agreement or approval of Steinhoff.”

Atif Latif, director of trading at Guardian Stockbrokers, said: “Steinhoff has been aggressively on the acquisition trail of late and seem to be keen for a transaction to take place. From Darty to Home Retail and now to Poundland it shows the group is keen to gain a foothold in the UK retail space.

“Granted this offer has been made without the consent of Poundland but again we see the rationale of Poundland to extend talks. Given the significant drop in the share price from near 405p to 139p it will be welcomed by shareholders who have seen significant equity value erosion of late. Shareholder and management now have to weigh up the following: sales/LFL trends showing improvement/management’s longer-term strategy that seems to be working and stabilising versus selling out to Steinhoff is the key question.”

RBC Capital Markets said a deal would fit with Steinhoff’s strategy of diversifying away from Souther Africa. It said it “should be an opportune time for a purchase given Poundland's depressed share price and valuation and the recent integration challenges of its acquisition of 99p stores”.

“On the other hand although Steinhoff has a proven track record of integrating businesses and improving their margins over time, we would see this acquisition as higher than average risk given the increasingly crowded UK variety discount space.”

At 1034 BST, Poundland shares were up 3.3% to 202.25p.