Poundland is keeping its £55m bid for rival 99p Stores alive by agreeing to an in-depth probe of the deal by the competition regulator.
The discount retailer said it would press ahead with plans for the takeover, opening up detailed negotiations with the Competition and Markets Authority (CMA).
Last month, Poundland said it was considering whether to walk away from the deal after an initial review by the CMA concluded the retailer might have to sell 80 stores if a deal went ahead.
Jim McCarthy, Poundland’s chief executive, sounded a conciliatory note in a brief statement on Wednesday.
“We look forward to working with the CMA in phase II in order to ensure that we can deliver an improvement in choice, value and service for 99p Stores’ customers.”
The low-price retailer revealed in February that it was planning to buy 99p stores in a cash and shares deal. Poundland has about 600 shops, while its smaller rival has 250.
The CMA initially found that if the deal went ahead, there would be “a realistic prospect of a substantial lessening of competition” in 80 areas where the two chains overlap. The two chains’ store opening plans showed there were a further 12 areas where Poundland and 99p Stores would be competitors in the near future, the CMA added.
Following the initial investigation, Poundland declined to offer “remedies” to the issues highlighted by the CMA.
Confirmation on Wednesday that it wants to press ahead with the deal will mean a more thorough review by a panel of investigators at the CMA. It will also give Poundland the opportunity to negotiate.
The phase II review is expected to take about six months, with a verdict likely by the end of October.
If the deal goes ahead, the 99p Stores will be rebranded as Poundland, as part of the larger group’s ambition to build a 1,000-strong chain to cash in on consumers’ growing demand for value shopping.
Poundland argues that a tie-up makes geographic sense, allowing it to accelerate its ambitions to expand in the south through the 99p Stores portfolio. Poundland employs about 13,000 people, while 99 Stores has 5,000 staff.
The 99p Stores chain is owned by the Lalani family and based in Northampton. The business was founded in 2001 by Nadir Lalani, who arrived in the UK from Tanzania in the 1970s and built and sold two convenience store chains before starting 99p Stores.
Helped by his sons Hussein and Faisal, he opened his first single price 99p shop in Holloway, north London, and within a year he had four.
The chain has grown rapidly in recent years, following the demise of Woolworths in 2008, and as bargain retailers became regular fixtures on UK high streets.
Poundland, which has been going for 25 years and floated on the stock market last year, would also acquire a warehouse and distribution centre in the proposed transaction.
