Hardly cut-price: Private equity look at 99p Stores for £60m

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The Independent Online

The family behind 99p Stores is considering a sale of the single-price retailer to a private equity firm for up to £60m.

Electra Partners is thought to be the front-runner to acquire the chain which has almost 150 shops, but a number of other private equity houses have also registered an interest.

The Lalani family, which owns and founded the shops in 2001, is now mulling over whether to grant exclusivity to a preferred bidder. The family hired DC Advisory Partners to run an auction last year and had initially wanted up to £80m for the chain. But sources suggest a price tag of between £50m and £60m is more realistic.

The group has expanded aggressively in recent years, largely by acquiring scores of shops from Woolworths, which collapsed in late 2008.

But 99p Stores has also benefited from rising demands for its products, such as a box of Maltesers or two litres of milk for 99p, among cash-strapped UK consumers. It more than trebled its pre-tax profits to £6.34m for the year to 31 January 2011, driven by rising sales and improved margins. Turnover soared by 26 per cent to £231m, boosted by 10 new stores including a new trading format, Family Bargains, which is not restricted to single pricing.

However, there is no guarantee that a sale will go ahead and potential investors have raised concerns during the due diligence process. All parties declined to comment.

If a buyer is found, it is thought that co-founder Nadir Lalani's sons, Hussein and Faisal – the managing director and buying director, respectively – could remain involved at the chain.

The UK's single-price market leader Poundland was bought for £200m by the US firm Warburg Pincus in 2010.