Poundland's 99p Stores deal could be rejected, threatens competition regulator

The UK competition regulator has threatened to reject discount retailer Poundland's proposed acquisition of 99p Stores.

The Competition and Markets Authority (CMA) said it would investigate the deal unless certain undertakings were accepted.

A detailed investigation would only be avoided if the companies "offer acceptable undertakings to address the CMA's competition concerns in a clear-cut manner", the authority said in a statement on Thursday.

It found that the transaction would give rise to the realistic prospect of "a substantial lessening of competition in 80 local areas where the companies currently overlap" as well as 12 further areas where stores are due to open.

Sheldon Mills, a director at the CMA, said: "After the transaction, Poundland will no longer face competition from its closest rival, and following our initial investigation, it is 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."

Analyst Clive Black at Shore Capital said in an anticipatory note earlier in the day: "If any remedies were deemed penal by Poundland’s management [...] then we believe that the company would walk away from the proposed acquisition, noting as we do that it has experienced dealmakers, which will only do the right thing for shareholders."

In a statement noting the ruling, Poundland said it was "carefully considering the CMA's announcement, together with the full detail behind it and will make a further announcement in due course".