Poundland Shares Drop as U.K.’s CMA Weighs Probe of 99p Deal

Poundland Group Plc shares dropped as much as 5.6 percent in London trading after U.K. antitrust regulators said they would start an in-depth probe of its merger with 99p Stores if it didn’t offer any concessions.

Poundland, which is buying 99p Stores for 55 million pounds ($81.6 million), would eliminate its closest competitor with the deal and reduce choice, value and service for shoppers, the U.K.’s Competition and Markets Authority said in a statement on Thursday.

“Given the potential impact on customers, we will now open a detailed investigation into this merger unless the parties offer suitable undertakings,” the CMA said in the statement. “After the transaction they will only face close competition from one other single price retailer with national scale.”

The transaction shows the attraction of discount retailing in the U.K. as a growing number of shoppers switch to bargain stores with fixed prices. Poundland, which serves an average of 5 million customers from more almost 600 outlets, has said it sees potential for more than 1,000 stores in the U.K. The deal would add another 2 million weekly customers and 251 stores.

“Poundland is carefully considering the CMA’s announcement” and “will make a further announcement in due course,” the company said in a statement.

99p Stores didn’t immediately respond to an e-mail seeking comment.

Poundland shares were down 0.8 percent to 358.2 pence at 12:37 p.m. in London after falling as low 340.7 pence.

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