Mark Kleinman: Poundland buyer bargains on a revival
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his weekly Morning Wire column
Poundland buyer bargains on a revival
Anyone for a bargain? Buying a chain of pound shops for a price lower than that of the goods it sells must feel like a pretty appealing deal for Gordon Brothers, the specialist investor in challenged retail businesses.
That’s only part of the story, though: the firm has agreed to commit £80m of funding to the turnaround of Poundland, which has been hurriedly offloaded by Warsaw-listed Pepco Group, owner of the Dealz chain on the Continent.
Even accounting for inflationary pressures on discount retailers, it takes a special talent to screw up Poundland in the way Pepco has in recent years. This, remember, was a company making pre-tax profit of more than £36m in the year prior to takeover by Pepco in 2016.
A practice statement letter, the prelude to what it hopes will become a court-approved restructuring plan, which was circulated to Poundland creditors in the last week lays bare the scale of the crisis at the chain.
According to the document, Pepco ran a rigorous – yet secret – sale process for its British chain last year after being approached by “an interested trade purchaser”.
“Following this approach, Pepco pursued the sale opportunity and ran a controlled sales process for the Poundland Group, during which another interested bidder emerged,” it said.
“The 2024 Sales Process reached an advanced stage, with completion targeted prior to publication of Pepco’s FY24 Accounts in early December, but negotiations broke down shortly prior to targeted signing at the end of November 2024 due to the declining financial performance.”
The retailer’s woes accelerated further early this year, the letter discloses, when it needed to secure £13.5m to pay a VAT liability owed to the taxman.
“Pepco agreed to provide this funding only on a short-term basis, as a stop-gap to allow Pepco to continue the strategic review of [Poundland],” the letter said.
Roughly 70 shops will close immediately if the restructuring plan is approved, with a further 180 or so switching to zero rent. Poundland’s estate of more than 800 shops will therefore dwindle significantly under the ownership of Gordon Brothers – and its survival in any meaningful form beyond this year must now be in question.
Metro Bank and TSB show bank feeding frenzy is underway
Has the starting gun been fired? A sustained wave of mid-tier bank consolidation has been forecast for more years than there are contenders to participate.
My report last weekend on Sky News that Metro Bank Holdings had received a takeover approach from Pollen Street Capital, the financial services-focused private equity firm, and news of an auction of TSB, might indicate that it is finally about to get underway.
There are plenty of reasons why the Metro Bank approach is logical, not least that Pollen Street – run by the formidable Lindsey McMurray – is a major shareholder in Shawbrook Group, the mid-tier lender which tried to seize on Metro Bank’s existential crisis in 2023 by trying to merge with it.
That deal failed to come off, and Metro Bank survived as an independent company by the skin of its teeth. While its shares have recovered, though, the high street bank is valued at barely a fraction of its 2021 peak of over £3bn.
It seems safe to assume that any deal to take Metro Bank private now would involve ongoing support from Jaime Gilinski, its billionaire Colombian shareholder who owns over 50 per cent of Metro Bank. A deal structured in partnership with him would mean the financing required by Pollen Street (or any other bidder) would be significantly diminished; and a take-private led by Pollen Street could pave the way for a Shawbrook-Metro Bank merger further down the line.
Nevertheless, the absence of any confirmatory statement from either side on Monday morning means that whatever talks there were between the two parties have now ceased, which is surprising given McMurray’s characteristic persistence. Don’t assume you’ve heard the last of this one.
Software company founder wants to party Wan more time
Anywan for a disco? It has been just over two years since David Richards, the founder of AIM-listed WANdisco, the software company, stepped down – along with his finance director – amid an investigation into “significant, sophisticated and potentially irregularities” in its sales figures.
Neither of the pair were themselves accused of wrongdoing, but their departure brought an ignominious end to the growth trajectory of what was regarded as one of the London market’s hottest technology growth stories.
So exciting was its progress that Richards had begun drawing up plans to switch its primary listing from London to New York – today’s most depressing capital markets trend for those with an interest in the City’s future.
Alas, its stock collapsed, and WANdisco is now named Cirata and under different leadership.
Richards, meanwhile, has returned to the junior markets at the helm of IntelliAM.ai, a machine learning specialist which works with major food and drink manufacturers. He steps down from that role next month, to be replaced by the veteran football financier Keith Harris.
Word reaches me via one of Richards’ allies that he plans to get his former WANdisco colleagues back together at a party later this month. The invite, aptly, is said to be headed ‘WAN more time’ – if only there was more to celebrate for investors.