Poundland Edges Toward Collapse as Ministers Press Owner Over 12,000 Jobs

Poundland, the British discount chain, is close to insolvency, and thousands of jobs and dozens of high street stores depend on whether its U.S.-based owner accepts a rescue deal. Business Secretary Jonathan Reynolds met representatives of owner Gordon Brothers on Wednesday, and the BBC reported that the meeting was brought forward from Thursday as efforts to find a buyer intensified.

According to The i Paper, Reynolds secured a commitment that Gordon Brothers will prioritize bids that protect UK workers' jobs. The BBC reported that the commitment also covers protecting stores, though it is still unclear whether the firm will keep the business together or break it up.

What this means for workers, suppliers and shoppers

Staff. The BBC put the number of jobs at risk at 12,000, while The i Paper said roughly 11,000 workers are affected, so reports differ. The BBC said buyers are currently interested in only about half of the stores. That would leave roughly 6,000 employees without a job, although staff at stores that are sold could be re-employed at the same premises.

Suppliers. Adam Turner, sales director at Bradford-based Highcrest Retail Brands, told the BBC that a collapse would cost his confectionery firm "a few million" in lost sales. The family business turns over about £50 million. He said smaller suppliers have told him "if Poundland goes under, so do they", and he estimated that up to 30,000 people could be affected overall. He added that suppliers would get back only a fraction of what they are owed, because Gordon Brothers, as a secured creditor, is first in line for repayment.

Shoppers. Prime Minister Andy Burnham said many Poundland stores are viable and matter to their communities. Which stores stay open would depend on any sale.

Who is bidding for Poundland

The i Paper reported that advisers are still talking to parties interested in the brand and large numbers of stores, around two months after the sale process began at the start of September. Offers and interest reported so far include:

• Xyra, a little-known investment group that has not owned a retailer before, proposed paying £12.5 million up front. It is backed by businessman Andrew Brode, and advisers are assessing the offer.
• Tesco held talks about buying up to 150 stores, according to the Press Association.
• Poundstretcher owner Fortress is understood to want as many as 250 shops.
• Iceland, Lidl, B&M and CDS Superstores, which owns Wilko and The Range, are also understood to be in the frame for some stores.

The BBC reported that Gordon Brothers has rejected a takeover bid that could have saved the 12,000 jobs.

What the owner, the company and the government say

Gordon Brothers, which bought Poundland for £1 last year, said it is pursuing all avenues through its sales process and is in active talks on offers. It said the business was in distress when it took over and needed a radical restructuring and significant funding, which it provided. It described Poundland as still "challenged and vulnerable" and not generating cash at a sustainable level.

Poundland managing director Barry Williams told the BBC the company is profitable, sales are growing and it has a bright future if allowed to deliver it.

Downing Street has criticized the handling of the sale. The prime minister's spokesman said Gordon Brothers appeared not to be acting in the best interests of its UK staff and stores, and that it must explain why it has not accepted any offer. Burnham said the government is prepared to do what it can, while acknowledging there are limits. Business Minister Kate Dearden said, according to the BBC, that the government does not want to interfere in ongoing commercial negotiations.

What happens next

Poundland has filed a notice of intention to appoint administrators, which shields it from creditors until next Thursday, the BBC reported. MPs have asked Gordon Brothers to appear before Parliament's business committee on Wednesday, Nov. 11. Committee chair Liam Byrne said the company should explain what is stopping it from accepting a fully funded deal that he said would save more than 12,000 jobs.

Around Prague, based on reporting by BBC, The i Paper