Poundland Founder Offers to Invest as 12,000 Jobs Hang on Thursday Deadline

By Daniel Okafor

Poundland has until Thursday to find a rescue deal, and up to 12,000 staff now hang on the outcome. The deadline has pulled in the chain's founder, a government minister and a hostile parliamentary committee, while the owner weighs offers for parts or all of the business.

Steve Smith, who set up Poundland in 1990 with a single store in Burton-upon-Trent, Staffordshire, said he wants to put money back into the Walsall-based retailer. Smith left the business in 2006. He said he contacted the owners repeatedly over the last three months and got no reply.

He had assumed the silence meant other offers were on the table. Then came the news that the company was approaching administration — a step he found hard to square with the trading numbers.

"And maybe I was a bit too late, but I'd certainly... with talking to the staff and how Poundland's performing at the moment, I'd certainly, if there's an opportunity, I definitely want to put some money back in there," Smith said.

What do the numbers say?

Smith said sales were up 11.2% on last year "even last week", based on contact with staff inside the business. He said he was "really surprised" to learn about the administration filing while sales were rising.

"Although Poundland made a loss last year, they're going to make a good profit this year, so it's just crazy," he said.

He put the wider damage beyond the payroll. Two or three thousand suppliers depend almost entirely on Poundland, he said, and four to five million customers pass through its 600 UK and Irish stores each week. If the chain disappears from high streets, it would "cause a lot of other retailers to fall as well".

"This is not just about 12,000 jobs. I'm estimating more like 20 or 30,000 jobs," he added.

Why did the takeover offer fail?

The mechanics sit with Gordon Brothers, the US-based private equity group that bought Poundland from Polish retail group Pepco last year for £1. Gordon Brothers has stopped funding the business and rejected a takeover offer from Irish firm Martin Property Group (MPG).

Concerns have been raised that Gordon Brothers declined the offer in order to secure repayment of a £30 million loan it inherited when it bought the company for £1.

Gordon Brothers said MPG had been "identified as the preferred bidder by Poundland's management team", but that "attention must now turn to other active bids". The group said it was evaluating interest for the whole business plus formal and indicative offers for significant viable parts of it, "with a view to minimising uncertainty for Poundland's people and all relevant stakeholders".

The board of Poundland Limited said it had been "working on a formal sale process" and that, despite "enormous efforts", it had not been possible to identify an acceptable offer for the business as a whole. It added: "We recognise any sale process creates uncertainty and particularly when set against a challenging UK economic environment."

What can the government do?

The BBC understands Business Minister Kate Dearden will meet senior Poundland executives later this week. Government sources concede the session is predominantly "fact finding", with limited scope to intervene in a commercial transaction — even one that puts over 10,000 jobs and hundreds of stores at risk. No meeting is currently planned between the government and Gordon Brothers executives. Sky News first reported the meeting.

Andy Burnham said the government was "ready to support" staff and called for answers on why an offer to buy the business had been rejected.

Liam Byrne, chair of the Business, Innovation, Science and Trade Committee and Labour MP for Birmingham Hodge Hill and Solihull North, went further. He said the company could still be saved and that "the whole deal stinks to high heaven right now".

"Because I think the issue that we've got is, you've got an owner that could well be trying to cut and run, to sell a business that is in fact a going concern in order to maximize their own profits and put in jeopardy 12,000 British jobs on the high street," Byrne said.

His message to ministers: "Do not leave this to the last minute, which is Thursday... please get on the case now to get everybody around the table to maximize every option to save as much of the business as possible."

Smith's investment offer adds one more bid to the pile Gordon Brothers must now evaluate before Thursday. Whether a founder's cash can outrun a lender's £30 million claim will decide how many of the 600 stores open on Friday.