South African retailer Steinhoff has upped its offer for UK discount chain Poundland after pressure from a US hedge fund to bump up the deal.
Poundland, which operates as Dealz in Ireland, has agreed to a higher 227p-a-share bid, worth £610.4m including a 2p-a-share dividend, following moves by Elliott Management to build up a 17.5% stake in the group.
Steinhoff had originally agreed a 222p-a-share deal worth £597m last month, but within days the US activist had increased its stake, reportedly with plans to bump up the deal – so-called “bumpitrage”.
Poundland and Steinhoff remained tight-lipped on Elliott’s involvement in the higher offer.
Darren Shapland, chairman of Poundland, said: “The Poundland board is pleased to recommend Steinhoff Europe’s increased all-cash offer which presents Poundland shareholders with an opportunity to realise their shareholding at an improved price.”
Steinhoff said its revised offer was final.
Markus Jooste, chief executive of Steinhoff, added: “By offering Poundland shareholders an improved cash offer we aim to bring certainty to the transaction recognising the strength and value of the business and its management team.”
Elliott has a track record of “bumpitrage” and muscling in on takeovers, having played a part in pushing for a better offer from brewing giant Anheuser-Busch InBev for SABMiller.
It also succeeded in getting a higher offer for Quintain – the UK property group that developed Wembley Stadium – last year from US buyout firm Lone Star.
Steinhoff, which owns UK furniture firm Harveys and Bensons For Beds, has been determined to expand further across Europe, having tried and failed to gatecrash two deals in recent months.
It recently lost out in a battle with Sainsbury’s to buy Argos owner Home Retail Group in March and was outbid for London-listed white goods retailer Darty.
It is backed by South African retail billionaire Christo Wiese, whose Brait investment group also owns controlling stakes in Virgin Active, New Look and food chain Iceland.
Poundland has around 18,000 staff across more than 900 stores and is headquartered in Willenhall, near Wolverhampton.
Steinhoff has already said it has no plans to change the group’s head office or employment conditions for staff.
The takeover follows a hefty slump in Poundland’s shares over the past year after tough trading and a difficult takeover of rival 99p Stores.
Annual results recently laid bare Poundland’s sales woes as underlying pre-tax profits fell 13.5% to £37.8m in the year to March 27, while bottom-line pre-tax profits crashed 83.7% to £5.9m, including converted 99p Stores.