Wilko rumour mill: B&M shares up as takeover whispers gather volume
Discounters led by B&M and Poundland-owner Pepco saw their shares jump today following reports that they may be considering a takeover of troubled retailer Wilko.
Home Bargains and The Range have also been named as potential buyers for the family owned business, according to reports in The Sun, with all parties showing interest in parts of the business.
B&M’s share price rose 2.27 per cent while the Poundland’s parent company, Pepco Group, closed up 0.43 per cent on the Warsaw Stock Exchange.
A sale would provide a slither of hope for the 12,000 employees across its 400 strong estate who face redundancy if a deal does not come to play.
But the clock is ticking for potential buyers as its administrators at PwC have given a deadline of Wednesday to place offers for the business.
Wilko, who crumbled under the pressure of high inflation, had spent the summer hunting for a rescue deal and tapped Hilco for £45m over the past year to keep it afloat.
Even during the height of the cost of living crisis, which drove customers back to cheaper stores in search of deals, it underperformed compared to its rumoured suitors.
Over the past few months, B&M and Poundland have released a string of financial results which highlighted their success from customers scaling back.
Revenues in B&M’s UK portfolio, which spans over 700 sites, reached more than £1bn in the first leg of the year up from £957m in the same period last year.
Poundland, which is owned by Pepco, also has plans to open a further 50 stores in the UK, due to demand for its cheap and cheerful goods.
“There are not many risers on the FTSE 100 but B&M is one of them,” Russ Mould, investment director at AJ Bell, told City PM
“The firm’s value credentials at a time when higher interest rates, and higher interest bills for consumers, is one possible reason why, while the rumoured interest in Wilko could be another.”
He added: “Everyone loves a bargain and investors could be thinking that B&M has a chance to grab market share, and knock-out a distressed rival, by taking over Wilko at what is likely to be a low price, given the chain’s financial woes.”
Wilko risks becoming the latest casualty of the UK highstreet which has had a number of iconic brands such as Paperchase and Debenhams wiped off it over the past few years.
“Wilko’s collapse last week highlights the danger facing many brands and they certainly won’t be the last major high street brand to fail in 2023. The chances of rescuing Wilko at its current scale seem slim and imminent large-scale job losses are highly likely,” Nick O’Reilly, director of restructuring and recovery at MHA, said.
“While the government’s reversal on takeout alcohol sales for pubs was a boost for the hospitality sector, wholesale support for businesses is desperately needed to stem the tide of insolvencies, which look set to continue rising in 2024 and possibly beyond.”
He added: “Despite a surprise uptick in GDP in Q2 and the prospect of falling inflation, the outlook for company insolvencies remains bleak. The aftermath of the government’s inflated pandemic support package, alongside a recovery that has not materialised, will continue to cause large numbers of businesses, both large and small, to fail.”
City A.M has contacted mentioned parties for a comment.