Pepco Group confirmed today that it has sold its struggling Poundland chain to Gordon Brothers for a headline figure of €1 (£0.85). The investment firm, which specialises in acquiring distressed assets, is pledging to invest up to £80m to help fuel a turnaround of the once fast-growing discounter.
Pepco has been weighing options for its 800-strong British chain since December, following a prolonged period of falling sales amid challenging trading conditions and increased competition from the likes of B&M and Home Bargains. Rising costs and inflation also forced it to abandon its core £1 price point.
“The agreed sale of Poundland marks an important milestone in our strategic plan to move away from FMCG and focus predominantly on Pepco, our higher margin clothing and general merchandise business,” said Stephan Borchert, CEO of Pepco Group.
By disposing of the business, Pepco expects to improve its revenue growth, drive higher profitability and margins, with stronger cash generation.
However, the company will continue to support Poundland by rolling over an existing secured loan of €30m and providing an overdraft of up to €30m. The overdraft will become available upon completion of a proposed restructuring plan, which analysts have suggested will include significant store closures and rent reviews with landlords of Poundland sites.
Poundland will continue to be led by Barry Williams, its current Managing Director, who returned to the business earlier this year. Gordon Brothers, the former owner of Laura Ashley, said it would provide up to £80m “to support the management team’s proposed restructuring and turnaround plan”. However, it gave no details of what Poundland’s restructuring plan would entail.
The business will continue to operate under the Poundland brand in the UK and under the Dealz brand in the Isle of Man and the Republic of Ireland.
Borchert concluded: “Poundland remains a key player in UK discount retail, with millions of customers annually and a well-loved brand and proposition. We want to sincerely thank all the Poundland team for their ongoing commitment and contribution to the Group and wish Barry Williams and his team all the best for the future.”
NAM Implications:
- Despite the sale for headline figure of €1 (£0.85)…
- …and the financial lubrication (loan and overdraft support)…
- …the options for Poundland are limited.
- Anticipate a sell-off of a chunk of outlets.
- And fingers crossed…
