Private Equity Firm TPG Buys Majority Stake In Poundworld


May 20, 2015

The budget retail sector has seen plenty of activity in recent months, especially in the UK. The latest acquisition was announced on Thursday, as private equity firm TPG said it had bought Poundworld. The deal is worth £150 million.


Overnight Multimillionaires
The budget retailer was founded in 1974 by Chris Edwards, who set up a simple stall in Wakefield in Yorkshire. In 2004, Mr Edwards opened the first high street Poundworld store and the sale to private equity will now turn him into a multimillionaire.


Mr Edwards said in the official statement, “I began this business as a market trader and we now have millions of customers from all corners of the nation and all walks of life.” He and his son, Chris Edwards Junior, are thought to hold on to a minority stake in the business.


The Company’s Growth
Poundworld has around two million customers in Britain, according to the Telegraph. The company has 230 single-priced shops and 50 “Bargain Buys” shops scattered across the country. The stores sell anything from tea to garden furniture.


PwC’s Dan Sheahan was quoted telling the Telegraph, “The Edwards family story is one of true entrepreneurship and hard work turning a market stall into one of the UK’s fastest growing retailers, now employing over 6,000 people.”


TPG’s Vision
The private equity firm announced it is funding the deal with pure equity. This is unusual for a big buyout firm, as deals are usually financed by debt. But as the big firms have a lot of dry powder lying around, the funds have been increasingly used in gaining new assets.


The private equity firm is aiming to expand Poundworld’s operations in the UK. The statement also talked about the need to evaluate the products on offer in order to “meet the increasing demand for value variety retailers”.


Abel Halpern, a partner at TPG, said in the statement, “With our financial backing and retail experience, combined with Poundworld’s entrepreneurial dynamism and strong brand, the business is now well positioned for continued growth.”


TPG has been active in the retail sector in recent months. In 2014, it sealed the deal for Victoria Plumb, the bathroom supplier, in a joint venture. It also bought Prezzo, the pizza chain, in a £304 million deal last year.


Increasing Competition
The budget retailer sector in the UK has seen plenty of action in recent months, as competition toughens. Much of the increased relevance of the operators is down to the economic slump after the financial crash. Although the UK economy continues to grow, these chains are well positioned to enjoy increased sales.


Poundworld’s biggest rival Poundland, as well as another rival B&M Bargains, floated recently on the London’s stock market. Poundland’s market value stands at £794 million, while B&M Bargains enjoys a valuation of £3.3 billion.


Furthermore, Poundland is currently under review with its recent acquisition of 99p Stores. The British Competition and Markets Authority is looking into the £55 million deal. The findings of the review will be published within six months.


It remains to be seen whether the budget retailer sector continues to attract private equity and whether the sector can attract acquisitions outside the UK as well.

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