US activist fund increases stake in Poundland

US activist fund Elliot Management has increased its stake in Poundland to about 17.5 per cent within days of the discount chain agreeing to be bought by South African company Steinhoff for 220p a share in cash. It is enough to derail Steinhof's bid, should the US fund choose.

Poundland owns Dealz, which has 53 shops in Ireland and recently announced plans to open a further 20. It says it has more than 300,000 Irish customers.

Bumpitrage

Elliot’s move is post-M&A arbitrage, or “bumpitrage”, where funds agitate for a rise in bid prices. It is a form of merger or event-driven arbitrage and traces its roots to greenmail, where activists of yore forced companies to buy their stakes at preferential rates.

Poundland, market value £600 million, is a titbit for Elliott, which was founded by Paul Singer in the 1970s and manages $28 billion in assets.

Steinhoff’s offer is comprised of 220p per Poundland share as well as a final dividend of 2p per share.

The move for Poundland is Steinhoff’s third attempt this year to increase its presence in Europe after walking away from high-profile takeover battles for Britain’s Home Retail and France’s Darty.