Competition watchdog provisionally clears Poundland’s £55m acquisition of 99p Stores

SINGLE price retailer Poundland’s bid to acquire rival 99p Stores in a £55m deal has been provisionally cleared by the competition watchdog.

The Competition and Markets Authority had referred the proposed deal to an in-depth investigation in April amid fears the takeover could lessen competition in certain areas where both stores operated.

The anticipated acquisition would create a combined network of around 800 UK stores and strengthen Black Country-based Poundland’s position as the leading single price retailer.

An independent CMA panel examining the merger sought the views of Poundland and 99p and other high street retailers before making its ruling. It also commissioned an independent face-to-face survey of more than 5,000 customers of the two merging companies, and examined their internal documents and other commercial data.  

In a statement today, the CMA said it had “provisionally concluded that the merger may not be expected to result in a substantial lessening of competition. Consequently, customers would not face a reduction in choice, value or lower-quality service as a result of the merger”.

The CMA found that, along with Poundworld, the companies are each other’s closest competitors but after the merger they will still face competition from other value retailers such as B&M, Home Bargains, Wilko and Bargain Buys, along with Tesco and to an extent Asda.  

The panel concluded that Poundland would not have an incentive to reduce the quality of its offering, either at the local or at the national level. It said currently, Poundland and 99p set the same retail offer at all of their stores.

Therefore it did not believe that Poundland would have a greater incentive to vary its retail offer locally as a result of the merger as there would only be a small overall increase in the proportion of areas in which Poundland faces no competitors.

At a national level Poundland competes with a number of retailers across its local areas and only a third of Poundland’s stores face competition from 99p. In addition, the panel said many other value retailers also had ambitious expansion plans.

The CMA will report its full findings in October.

Poundland said it welcomed the CMA’s provisional conclusion and was studying its findings in detail.   It pledged to work with the CMA ahead of the publication of its full review in the autumn.

Jim McCarthy, chief executive of Poundland, said: “We welcome the CMA’s provisional clearance of our acquisition of 99p Stores and we look forward to a satisfactory conclusion to its Phase 2 review. We continue to believe that the acquisition of 99p will be great for customers and for shareholders alike.”

Philip Marsden, chair of the CMA inquiry, said: “There has been a significant rise in prominence of value retailers for UK shoppers.  Our evidence indicates that customers are primarily attracted to Poundland and 99p because of their affordability and see them as good alternatives to each other.  Nevertheless some customers can and do switch to other types of discount retail chains.

“We conducted our own customer survey and examined a large amount of data to understand whether, after the merger, customers would have enough alternatives both overall and in the local areas where there is currently a Poundland store and a 99p store.

“Both across its business and in individual areas, Poundland would continue to face competition from other value retailers so we don’t currently believe customers will face a reduction in choice, value or lower-quality service as a result of the merger.”