Hilco, Gordon Brothers in two-way race to buy Poundland - report

(Sharecast News) - Modella Capital, the investment firm which has agreed to buy WH Smith's high street operations, has reportedly been eliminated from the auction of Poundland. According to Sky News, Poundland's owner, Pepco Group, has shortlisted two rival firms to buy Poundland, which needs a capital injection of more than £50m to aid a turnaround plan.

A Pepco insider told Sky on Friday that Hilco, the former owner of HMV and Homebase, and former Laura Ashley-owner Gordon Brothers were involved in a two-way race to buy the chain.

They added that a decision on a preferred bidder was likely within days.

Pepco said this week that underlying earnings at Poundland could be wiped out in the current financial year, underlining the scale of the challenge facing a new owner.

If a deal does get agreed with either of the remaining bidders, they would also be required to repay roughly £30m of debt owed to Pepco.

Poundland employs more than 15,000 people across an estate of over 800 shops in the UK and Ireland.

Industry sources told Sky that roughly 100 stores are likely to be earmarked for closure by a buyer given their poor performance.

A Pepco Group spokesperson told Sharecast: "After evaluating a range of alternatives, the group is actively exploring a potential divestment of the Poundland business, as stated at its half-year results on 22 May. This process is advancing and a further update will be provided at the appropriate time. The group expects to complete the separation of Poundland during the current financial year.

"Poundland remains a key player in UK discount retail, serving over 20 million customers annually. With consumer demand for value rising, the business is well-positioned for recovery under revitalised leadership. A clear turnaround plan - including reduced costs and operational refinements - aims to restore profitability."