Poundland: Steinhoff International Holdings considers bidding for discounter to expand in Europe

Poundland shares have fallen by a third in a year

The emergence of Steinhoff as a potential bidder comes ahead of Poundland's full-year results on Thursday (PA)

Steinhoff International Holdings is considering an offer for Poundland, as the South African company attempts to expand in Europe, after twice being denied in recent months.

The announcement was made without Poundland’s consent, Steinhoff said on Wednesday, adding that it will provide an update in due course. Steinhoff has until 5pm on 13 July to either announce its intention to make an offer or walk away, according to UK takeover rules.

In a separate statement, Poundland said there’s no certainty a firm offer will be made, and advised its shareholders to take no action.

Poundland shares rose 6.6 per cent to 208.75 pence at 9.08am in London, valuing the UK retailer at £562m ($797m).

They gained 24 per cent on Tuesday, surging in late trading after it emerged that private-equity firm Warburg Pincus sold its entire 15.3 per cent stake. The buyer’s identity has not yet been disclosed.

Steinhoff, led by chief executive Markus Jooste and billionaire Christo Wiese, has been foiled in attempts to buy two other retailers this year.

In March, it ditched its pursuit of Britain’s Home Retail Group, allowing Sainsbury to win the owner of the Argos general-merchandise chain.

The following month it abandoned a bid for French electronics retailer Darty Plc after a protracted duel with Groupe Fnac.

“It does seem like they are being incredibly opportunistic,” said Bryan Roberts, an analyst at TCC Global. “Poundland doesn’t tie in immediately with any of their existing businesses. With Argos and Darty there was a clear overlap in electronics and household products.”

Steinhoff is seeking to expand in Europe and challenge the likes of Sweden’s Ikea after moving its primary share listing to Frankfurt from Johannesburg in December. Founded in Germany by Bruno Steinhoff in 1964, it owns the Bensons for Beds chain in the UK along with French furniture retailer Conforama.

The company employs 90,000 people and has more than 6,500 stores in 30 countries from the UK to Australia.

For Poundland, the potential offer comes at a time when business is on a downward curve. Sales have been affected by a surge in online shopping and a price war among the UK’s largest supermarket chains, while last year’s acquisition of the rival 99p Stores chain has also caused disruption.

British retail industry veteran Kevin O’Byrne was named chief executive officer in March, and will take the reins on 1 July.

“Given the low margin at Poundland it would not take much in terms of central cost savings to create sufficient synergies to drive a good return from this acquisition,” Graham Renwick, an analyst at Exane BNP Paribas, said in a note.

Even after the recent share gains, Poundland stock is still about 30 per cent below the 300p a share that investors paid in an initial public offering in 2014.

© 2016 Bloomberg L.P