The UK Government is investigating whether Poundland owner Gordon Brothers is needlessly driving the discount chain into administration, impacting 12,000 jobs, the Financial Times (FT) reported.
The report stated that business secretary Jonathan Reynolds has instructed his chief strategic business adviser, David Bickerton, to clarify the circumstances surrounding the retailer’s possible collapse.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
Gordon Brothers initiated an accelerated sales process for the discount chain in September.
However, the distressed investment company rejected a takeover proposal from Ireland’s Martin Property Group to acquire the business as a going concern, heightening the likelihood of a breakup and insolvency.
That rejection contributed to the resignations of three Poundland directors, namely Andrew Kirkpatrick, Stephen Welch and Dominic Young, who had been appointed 12 days prior to manage a solvent sale.
An insolvency could affect thousands of positions, including roles at a distribution centre in Makerfield, located within Prime Minister Andy Burnham’s constituency.
Government figures stated that Bickerton would pose “fairly basic questions of senior people around Poundland”.
One source commented: “He’s asking factual questions to establish what the situation is.”
An ally of Reynolds noted that he “would always be concerned when a lot of hard-working people may not have a job”.
Gordon Brothers acquired Poundland from Pepco Group for less than £1 last year.
The owner has sought £30m to cover a shareholder loan inherited from Pepco, a condition that has discouraged prospective bidders.
Professional services group AlixPartners is reportedly on standby to be appointed administrator by Poundland’s directors.
The advisory company declined to comment to the FT.
Dave Dodd and Steven Smith founded Poundland in 1990, establishing the operation around a uniform £1 price point.
The retailer has since departed from its original pricing structure in response to rising overheads, increasing theft, and competition from Aldi, Lidl, B&M and Home Bargains.
Earlier this month, Fortress Investment Group reportedly dropped its bid to purchase Poundland in its entirety and is now seeking to acquire between 200 and 250 of the retailer’s stores.
