South African retail conglomerate Steinhoff International Holdings NV (FWB/JSE: SNH) agreed to acquire struggling British discount chain Poundland Group PLC (LSE: PLND) in a cash deal valued at £597 million ($800 million), giving Steinhoff more than 900 shops in Britain, Ireland and Spain. Steinhoff already owns the high street brands Harveys Furniture, Bensons for Beds, Sleepmaster, Cargo, and Pep&Co in the UK.
It is the biggest takeover of a listed British company since a vote on June 23 to leave the European Union, Reuters said.
The offer price of 222 pence represents a premium of approximately 40.3% to Poundland’s closing price of 158.25 pence on June 13, 2016.
On July 14, Elliott Capital Advisors, the UK arm of US hedge fund activist investor Elliott Management, reported a 13.2% stake in Poundland, suggesting that Steinhoff may be facing pressure to increase its £597 million offer.
Elliot’s stake is said to be controlled via contracts for difference (CFD). A CFD is an agreement between two parties – the investor and the CFD provider – to pay each other the change in the price of an underlying asset, in this case Poundland shares.
Elliott Management has more than $27 billion of assets under management. Its flagship hedge fund Elliott Associates LP was founded in 1977 by billionaire Paul Singer. The firm has offices in New York, London, Hong Kong and Tokyo.
Elliott has been actively amassing multiple significant company stakes urging its targets to seek lucrative exit strategies, including cyber security firm Imperva (NYSE: IMPV), founded in 2002 by a team of prominent Israeli high-tech entrepreneurs; Polycom (NASDAQ: PLCM), which private equity firm Siris Capital Group LLC agreed to acquire last week in a deal valued at $2 billion; Canada’s Mitel Networks (NASDAQ: MITL; TSX: MNW) which had previously offered to acquire Polycom; and Symantec (NASDAQ: SYMC), which agreed to acquire Blue Coat for $4.65 billion last month. Elliot had also bought a large stake in Qlik Technologies (NASDAQ: QLIK)(QLIK), a visual analytics company, which private equity firm Thoma Bravo LLC agreed to acquire for $3 billion in early June.
Poundland conducted its IPO on the London Stock Exchange at 300 pence a share in March 2014. “Its shares have plunged in value over the past year due to poor trading, competition from discounters such as Aldi and Lidl and its £55 million takeover of 99p Stores, which was delayed by a competition inquiry,” said The Guardian. “During the six-month investigation by the regulator, 99p Stores lost its credit insurance, which meant the retailer was cut off by many suppliers, leaving it with empty shelves and resulting in the departure of 1,000 staff,” the British newspaper added.
In 2011, Steinhoff acquired Conforama, Europe’s second largest retailer of home furnishings, with over 200 stores in France, Spain, Switzerland, Portugal, Luxembourg, Italy and Croatia.
In 2015, South African low-end retail investment and holding company Pepkor became a member of the Steinhoff group.
Steinhoff International is a South African-based integrated retailer that manufactures, sources and retails furniture, household goods and general merchandise in Europe, Australasia and Africa. Steinhoff was founded in 1964 by Bruno Steinhoff in Westerstede, Germany and moved its headquarters to South Africa in 1998. It went public on the Johannesburg Stock Exchange. In December 2015, Steinhoff moved its primary listing to the Frankfurt Stock Exchange and founded a new Dutch holding company based in Amsterdam, while its management remained in South Africa.