Poundland shares dropped about 5.6 per cent in London trading after the British competition and market authority (CMA) announced that they would start an in-depth investigation concerning Poundland's merger with 99p Stores if the two parties involved didn't offer any concessions.
Poundland wants to acquire competitor 99p Stores for £55 million which, according to a statement by CMA on Thursday, would eliminate Poundland's closest competitor and reduce choice, value on service within the market greatly.
“Given the potential impact on customers, we will now open a detailed investigation into this merger unless the parties offer suitable undertakings,” the CMA said in the statement.
“After the transaction they will only face close competition from one other single price retailer with national scale.”
Poundland serves an average of five million customers per week at its almost 600 branches stated that they see potential for at least 400 additional stores throughout the UK. The acquisition of 99p Stores would give Poundland an additional 251 shops and two million weekly customers more.
“Poundland is carefully considering the CMA’s announcement” and “will make a further announcement in due course,” the company said in a statement.
Bloomberg News, edited by ESM
