Poundland sold to Gordon Brothers for under £1

Pepco Group has completed the sale of UK value chain Poundland with Gordon Brothers the new owner, as expected. Pepco said the transaction enables the group to focus on the higher-growth and higher-margin eponymous business. 

And for Poundland it’s a lifeline for a business that has been struggling for a while and making massive losses, although it’s a lifeline that will involve a great deal of pain as up to 200 store closures (out of its 800-strong total estate) and a large number of job losses are expected. 

The chain has actually been sold to 1903 Peach Bidco Limited, a newly-formed company established by certain affiliates of Gordon Brothers International. The former owner of Laura Ashley is expected to pump up to £80 million into the business and will also launch a restructuring process. 

Pepco explained that the shares in Poundland have been sold to Gordon Brothers for a “nominal consideration, with Pepco’s secured loan of £30 million and certain unsecured loans remaining in place between Pepco Group and Poundland, as well as an overdraft of up to £30m to be put in place between Pepco Group and Poundland upon completion of the proposed restructuring in support of the transaction”. What does that mean in practice? Poundland has basically been sold for €1, or less that £1.

It will continue to be led by Barry Williams, currently managing director of Poundland, and will continue to operate under that brand in Britain and the Dealz brand in the Isle of Man and Republic of Ireland.

Poundland has been a drain on Pepco for some time and despite its ultra-value offering is facing a tough UK market. With wafer-thin margins, it’s not well placed to absorb higher costs (such as rising National Insurance  contributions). There have also been newspaper reports of unpaid business rates bills.

But being independent of Pepco could be a good thing if it allows it to more closely tailor its product offer to UK tastes.

Pepco Group, which acquired Poundland in 2016, can now get back to its main focus on its core chain and CEO Stephan Borchert said: “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.

“This transaction will strongly support our accelerated value creation programme. I am confident that Pepco has the right foundations to be one of Europe’s most successful discount retailers, delivering customer satisfaction, profitable growth and shareholder value.”

But he added: “Poundland remains a key player in UK discount retail, with millions of customers annually and a well-loved brand and proposition.”