US buyout group TPG snaps up UK discounter Poundworld

Private equity group TPG has acquired Poundworld, the pound store operator, for about £150m in cash, highlighting the continuing boom in the UK discounters market.

The deal will see Chris Edwards, who founded the business more than 40 years ago from a market stall, and his son Christopher Edwards junior, who continue to own the business become multimillionaires. However, the pair, along with other senior executives, will retain a substantial minority stake in the business.

West Yorkshire-based Poundworld has about 280 stores under the Poundworld and Bargain Buys brands. Poundworld, is the second-biggest single-price discount retailer in the UK, while Bargain Buys, which operates with multiple prices, trades from 50 sites across the country.

The US buyout group is planning to invest in expanding Poundworld's store footprint across the UK, as well as new distribution facilities and retail systems, including data analysis.

Mr Edwards senior said: "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. Still, there is so much more for us to achieve."

Abel Halpern, a partner at TPG, said: "We see the continuing rise and evolution of the value retailer as an exciting change in the UK retail landscape."

The deal intensifies the reshaping of the value retail sector. It comes two months after Poundland bid £55m for rival 99p Stores, a deal which is now facing an in-depth investigation from the UK's competition watchdog.

The value retail sector has been growing rapidly as consumers change their shopping habits. According to recent figures from the Local Data Company, a retail information provider, the value retail sector, including the discount supermarkets Aldi and Lidl, as well as the frozen food specialists Iceland and Farmfoods and the pound shop chains, including Poundworld, opened 1,367 stores over the past five years, equivalent to five a week.

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In 2014, discounters, including the pound store operators, opened twice as many units as the big four supermarkets, excluding their fast growing convenience store chains, according to the Local Data Company.

The acquisition of Poundworld also underlines TPG's increasing interest in mid-market deals. Over the past couple of years, the US buyout group has acquired Prezzo, the restaurant chain, for £300m, Victoria Plumb for about £200m as well as TES Global, the digital education business that owns the Times Educational Supplement, in a deal valuing the company at £400m.

Other large buyout firms have also returned to their mid-market roots in recent acquisitions, motivated in part by higher prices and less ability to deploy capital elsewhere.

Prices for bigger corporate buyouts have grown expensive because of competitive auctions and the often-simultaneous pursuit of initial public offerings by sellers.

Private equity backers have also grown wary since the financial crisis of "club" buyouts where several firms team up to buy a large asset, which investors are therefore forced to own through several funds, and layers of fees.

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