Poundland seeks rescue as owner weighs store break-up

Poundland is moving towards insolvency after a proposed rescue bid from Martin Property Group failed to meet the expectations of its US owner, Gordon Brothers, putting the future of the discount chain’s 600 UK and Irish stores and 12,000 staff at risk.

The retailer’s directors are filing a notice of intention to appoint administrators. If approved by the High Court, it would give Poundland 10 days’ protection from creditors while it seeks a rescue deal, the BBC reports.

Gordon Brothers bought the struggling chain from Polish group Pepco for a nominal £1 in June last year, then put it up for sale a little over a year later. The BBC reports that Gordon Brothers wants to recover a £30m shareholder loan inherited from the previous owners. Martin Property Group’s offer was understood to be £5m upfront, with the remainder deferred.

Poundland managing director Barry Williams told staff that Gordon Brothers had restricted access to funds used for day-to-day operations. He described the situation as “unexpected, unwanted and wholly avoidable”, and said the company’s sales were strong and its recovery was taking root.

Williams said Martin Property Group’s proposal was a “fully funded, ready to go bid” that would have kept the business intact. Three independent directors appointed to oversee the sale resigned after disagreeing with Gordon Brothers’ decision not to accept the offer.

Gordon Brothers said it was now considering other bids, including offers for viable parts of the business. It is Poundland’s main creditor and has lent the retailer £70m, according to the BBC.

A break-up and sale of stores in groups is considered the most likely outcome. Poundstretcher owner Fortress is reportedly interested in 200 to 250 stores, while another large retailer is interested in more than 100 sites. More than half a dozen retailers, including Iceland, Lidl and B&M, have expressed interest in the store estate.

Gordon Brothers said the options would be assessed with the aim of reducing uncertainty for Poundland’s staff and other stakeholders. Its position is that employees may be able to find work with new store owners. The BBC reports that Gordon Brothers has lined up AlixPartners as administrators; AlixPartners declined to comment.