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Poundland owner thought to be considering sale or floatation

The private equity owners of Poundland are eyeing a possible sale or float of the discount retail chain early next year to capitalise on demand for value stores as the economy remains in the doldrums.

Europe’s biggest single-price discount retailer by number of stores was acquired by private equity group Warburg Pincus three years ago for £200m. It could be valued at up to £600m, according to people familiar with the situation.

The strong demand for a majority stake in B&M, a rival value chain that was put up for sale last year, makes an auction more likely than a float, the people said.

Late last year, US private equity group Clayton Dubilier & Rice agreed to buy 60 per cent stake in B&M from the Arora family in a deal that gave the company an enterprise value of about £965m.

CD&R, which appointed Sir Terry Leahy, the former chief executive of Tesco, as B&M’s chairman, beat off competition from several other private equity groups for the stake.

Poundland and Warburg Pincus declined to comment.

The chain is among the retailers that have benefited from the global economic downturn. It opened 60 stores, primarily in the UK, last year, and will open another 60 this year. The chain, which hired Andrew Higginson, the former Tesco director as non-executive chairman last year, wants to increase its UK store base from the current level of about 450 to 1,000 over the next five to 10 years.

The chain has also moved into the Republic of Ireland with Dealz. This business is profitable in its first year and is likely to be used as a springboard to further expansion in continental Europe.

Poundland is thought to have delivered a good performance in the financial year to March, but the information is not yet public. It could kick off the sale process once it has sales numbers for the crucial Christmas and year trading period. Poundland made underlying earnings before interest, tax, depreciation and amortisation of £31.7m in the year to March 2011.

The chain could be in line to have its third private equity owner in a row. The group was acquired by Advent International for £50m in 2002 and sold to Warburg Pincus in May 2010.

Value retailers have thrived over the past few years as consumers, under pressure from prices rising faster than wages have sought to economise, cutting back on discretionary items and spending on more on food and essentials.

Source : Andrea Felsted – Financial Times

05 May 2013
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