Poundland has filed a notice of intention to appoint administrators, putting the future of around 12,000 workers at the high street discounter in doubt.
Court filings show the retailer lodged the notice this afternoon. The filing gives the business 10 working days of breathing space from creditors in which to secure a potential rescue deal.
Advisers are understood to still be in talks with parties interested in buying the brand and large parts of its store estate.
Poundland managing director Barry Williams told staff in a memo that the situation is “unexpected, unwanted and wholly avoidable”.
The move follows the rejection by Gordon Brothers, the US investment firm that owns Poundland, of a takeover offer from Irish real estate firm Martin Property Group. Poundland’s management named Martin Property Group as their preferred bidder earlier this month.
Gordon Brothers bought Poundland from Pepco Group for a nominal £1 in June last year, with Pepco keeping a minority stake. The owner put the business up for sale in September and has been in talks with a number of parties about buying all or parts of it.
The dispute between the owner and Poundland’s management centres on a £30m shareholder loan. An analysis of the proposed sale found that Martin Property Group was unwilling to make an upfront repayment on the loan, Business Matters reported on Tuesday.
Martin Property Group’s proposal would have involved paying as little as £1 for Poundland’s equity, repaying the balance of existing loans and injecting millions of pounds to fund a turnaround plan, according to Sky News. The firm is said to have committed to retaining the chain’s store footprint and workforce.
Gordon Brothers said earlier this week: “While Martin Property Group had been identified as the preferred bidder by Poundland’s management team, attention must now turn to other active bids. As well as interest from buyers for the whole business, the sale process has also surfaced a number of formal and indicative offers for significant viable parts of the business from established retail operators.”
Sky News reported on Tuesday that three independent directors recruited this month to steer Poundland through the sale were expected to quit after a disagreement with Gordon Brothers. Sources told the broadcaster the trio had expressed disquiet at what appeared to be attempts by Gordon Brothers to steer the business towards an insolvency process.
Fortress Investment Group, which owns Poundstretcher, CDS Superstores, the owner of The Range and Wilko, the German discounters Lidl and Aldi, and Modella, the owner of TG Jones, have all expressed interest in parts of Poundland’s store portfolio, according to Sky News.
Fortress amended its offer earlier this month to target between 200 and 250 of Poundland’s roughly 530 UK shops rather than the whole business, Sky News reported, citing competition concerns as the reason for the change. The broadcaster said Poundland trades from between 550 and 600 outlets across the UK and Ireland.
The chain has already shrunk under its current owner. Business Matters reported in May that the restructuring which followed the sale had seen 149 stores shut and roughly 2,200 jobs cut as the retailer refocused on lower price points.
The analysis of the bids suggested a break-up could protect staff through a TUPE transfer, as many of the offers included provisions for one. Government guidance on TUPE and insolvent businesses states that the regulations will normally apply where a business is rescued and taken over or transferred, but that employees are unlikely to be protected if it is closing down.
Filing a notice of intention creates a moratorium, under which no legal process may be started or continued against the company without the consent of the administrator or the permission of the court, according to HMRC guidance. The guidance states that the appointment of the administrator will take effect within 10 business days of the notice being filed.
