Gordon Brothers snaps up Poundland, to inject 80 million pounds into turnaround

Restructuring and investment firm Gordon Brothers has emerged as the buyer of Poundland. As a result, the British budget retailer will receive an 80 million pound financing boost to back a ‘Proposed Restructuring’, agreed on by all three parties, including former owner Pepco Group. Details on this plan are expected to be shared by Poundland in “due course”.

In a press release, Gordon Brothers said the financing would be used to support Poundland’s “go-forward strategy”, currently led by managing director Barry Williams. In a statement, Williams welcomed Gordron Brothers as Poundland focuses on returning the business to “its core heritage category strengths”. He continued: “We look forward to working with our supplier base to ensure we continue providing exceptional value to budget-conscious consumers in the UK."

Williams, who returned to the MD role earlier this year, will continue to lead the business under its new ownership. Pepco is anticipated to obtain a minority investment interest in Poundland, subject to the proposed restructuring of the retailer, which has been sanctioned by the High Court in England. Gordon Brothers will, in its place, obtain the ownership of all Poundland stores, its 16,000 colleagues, assets and liabilities.

Court-sanctioned proposed restructuring to take effect

In a separate press release, Pepco, which also owns European discount chain Dealz, said the sale reflected its own “strategy to simplify the group’s structure and drive shareholder value”, as the retailer had been weighing on its financials over the past year. Pepco said the transaction will improve group revenue growth, profitability and margins. In the latest financial year, Poundland had contributed 33 percent to Pepco’s revenues, yet just 5 percent of its EBITDA.

The shares in Poundland have been sold to Golden Brothers for “nominal consideration”, while Pepco’s secured loan of 30 million pounds and other unsecured loans remain in place between the company and Poundland. An overdraft of up to 30 million pounds is to further be put in place between the two counterparts upon completion of a proposed restructuring, supporting the transaction.

Gordon Brothers has been involved in the turnaround or restructuring of a number of fashion brands, including Laura Ashley, Orsay and Bench. The firm provides both short- and long-term capital to those undergoing transformation, while further providing expertise to management teams leading such strategies.

At Poundland, which currently operates around 800 stores in the UK, business had remained challenging into the first quarter of the current financial year, according to Pepco CEO, Stephan Borchert. As such, the group lowered its EBITDA forecast for the chain from 50 to 70 million euros to around 0 to 20 million euros. Pepco cited difficult trading conditions that were further exacerbated by the sales of old stock and product availability issues as core causes.