Warburg Pincus cuts stake in UK discount retailer Poundland

Private equity firm Warburg Pincus said yesterday that it had slashed its stake in UK discount retailer Poundland from 30.4 per cent to 16.4 per cent, raising about £142 million pounds through a share placing.

Warburg Pincus had only a day earlier said it planned to sell 25 million Poundland shares, though it raised the size of the offering to 35 million shares due to strong demand for the stock of Europe's largest single-price retailer.

The stake had been placed with institutional investors at 405 pence per share.

Thanks to persistent recession-era shopping habits, discount retailers in both general merchandise and food were winning market share across the industry.

Shares in Poundland, which listed on the London Stock Market at 300 pence last March, were down 6.7 per cent yesterday.

Even as it cut its Poundland holding, Warburg Pincus said it remained "a significant and supportive shareholder of the company, its management team and strategy".

Poundland said last Friday that it had agreed to a deal to buy smaller privately-owned rival 99p Stores for £55 million, subject to the approval of competition authorities, which led to an increase of 15 per cent in its share price.

The company planned to part-finance the purchase through an equity placement.

Poundland shares retreated 5.5 per cent this morning at 393.9p following the Warburg Pincus sell-off for 10 million more shares than originally planned, after its's acquisition of 99p Stores last week.

Though Poundland thrived during the recession, it had continued to retain its popularity with high street shoppers. Since it floatation in March, shares had more than doubled from their listing price of 200p to 416p yesterday.

Poundland chief executive Jim McCarthy said the deal to acquire 99p Stores for £55 million would "generate further value for Poundland's shareholders".