The UK Competition and Markets Authority (CMA) has given the go-ahead to Poundland’s £55m takeover of rival 99p Store.
The merger, which will see the Poundland brand inherit a further 800 UK stores, would not bring about a “substantial lessening of competition,” said the CMA.
The watchdog, after receiving the views of high street retailers and 5,000 shoppers concluded that the merger gave Poundland no incentive to raise prices or reduce its service as a result fo the volume and strength of rivals in the discount market.
Philip Marsden, chair of the inquiry group, said: “There has been a significant rise in prominence of value retailers for UK shoppers.
“Both across its business and in individual areas, Poundland would continue to face competition from other value retailers so we don’t currently believe customers will face a reduction in choice, value or lower-quality service as a result of the merger."
He concluded: “We have also seen in recent years ‘the Big Four’ supermarkets engaging in intense price competition, some of which involving the promotion of £1 products. On the basis of the evidence to date, we do not think customers will be worse off from the merger.”
Jim McCarthy, chief executive of Poundland, said: “We welcome the CMA’s provisional clearance of our acquisition of 99p Stores and we look forward to a satisfactory conclusion to its phase two review. We continue to believe that the acquisition of 99p will be great for customers and for shareholders alike.”
In the discount bracket, Poundland will still face tough competition from B&M, Home Bargains, Wilko and Bargain Buys - in addition to the Big Four supermarkets to a lesser extent.
Poundland shares surged by 5.7 per cent to 349p following the announcement.