The race to be the new owner of Poundland narrowed last week, with PE firms Endless, Hilco and Modella Capital reportedly making it through to the latest round of bidding.
The winner could return Poundland to its glory days of just a couple of years ago, or send it into a death spiral with more poor decision-making.
So, who are the suitors? And how do they differ?
Endless LLP
Endless has built a reputation for “doing quite well out of retail”, says a City source.
It acquired The Works out of administration in 2008 and floated it on the stock market for £100m 10 years later.
More recently, it bought American Golf from administrators in 2018, and “breathed new life into it”, growing sales and market share.
“They’ve come from a bottom-feeding turnaround environment, but in the last few years they’ve tried to follow some capital into a more mid-market environment,” says the source.
“They’re buying the unloved. Gary [Wilson, Endless joint-chair], talks about the ignored, the underinvested .”
That applies also to the supplier side. Endless has owned Hovis since 2020, and cake manufacturer Bright Blue Food since 2015 and is in talks with ABF over a potential deal over its Allied Bakeries division.
After acquiring Yorkshire Premier Meat in 2022 and combining it with Smithfield Murray to create Karnova Food Group in 2023, it grew sales from £115m to £135m before selling it to US meat giant OSI in February this year.
Hilco
In contrast, Hilco is a “retail specialist”, says the source.
Recent deals include funding a management buyout of family-owned homeware retailer Lakeland in April.
As a lender, it has provided a lifeline to the distressed, including Wilko, which it loaned £40m in January 2023, before becoming a creditor in the administration process seven months later, while also liquidating stock for PwC. It has also backed HMV and Superdry.
It will likely shed underperforming Poundland stores through a CVA, as will Endless.
“Neither will be afraid of doing that because they are all from insolvency practitioner backgrounds,” says the source.
The two could represent differing fates for Poundland management, though.
“Endless tend to back the management team; Hilco pretty much put their own team in. Hilco has a really good network of execution directors who can go in and effect change.”
Both will be “very focused on optimising cost base and working capital” to “generate some free cashflow to start investing in a growth strategy”.
Modella
London-based Modella was founded in 2022 and has risen to prominence with a flurry of high-profile investments in a matter of months.
It acquired WH Smith’s high street stores in March, in a £76m deal that rebranded the shops as TG Jones.
It is also no stranger to a CVA. It bought arts & craft retailer Hobbycraft in August last year, followed by variety discounter The Original Factory Shop in February, and has recently launched CVAs at both.
Sky News reports it is effectively banned from launching a CVA with former WH Smith stores for at least a year, under the terms of the deal.
Its chair, Steve Curtis, has over 40 years’ retail sector experience as an operator, turnaround professional and investor, according to Modella.
Pepco Group’s decision to sell Poundland in March followed a disastrous transition to sourcing clothing and GM at group level, which left gaps in crucial ranges such as DIY.
Along with cost optimisation, getting the range right again will be paramount, says GlobalData retail analyst Sophie Mitchell. It needs to “improve its offer, customer appeal and pricing of its core fmcg category”.
May the right bidder win.
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