Poundland faces possible takeover bid from Steinhoff

Poundland could face a takeover bid after South Africa's Steinhoff said it was considering making an offer for the UK discount retailer.

Shares in Poundland closed 2.2% higher after surging on Monday following takeover speculation.

The UK retailer told investors to take no action as there was no certainty an offer would be made.

Under UK takeover rules, Steinhoff has until 13 July to announce a firm intention to bid for Poundland.

Christo Wiese, Steinhoff's chairman and biggest shareholder, said he was interested in Poundland because it would be a "good fit" for Steinhoff, but did not elaborate further.

Vestact analyst Sasha Naryshkine said: "There's seem to be no obvious strategic fit, but it might just be a matter of adding discounted chains to its stable because that's essentially what they are: a discount retailer."

Steinhoff owns Pep, a retailer with 1,800 stores across 10 countries in southern Africa that sells discount clothing, footwear and homewares.

The group, which also also owns the UK furniture chain Harvey's, makes most of its products in developing countries, and sells its furniture across Europe.

Earlier this year, Steinhoff pulled out of a takeover battle for Argos owner Home Retail Group. leaving the way clear for supermarket chain Sainsbury's.

The South African company also failed to take over French electricals retailer Darty.

Steinhoff International Holdings is worth $22bn (£16bn), while Poundland is valued at almost £540m.

Since 1990, Poundland has opened about 600 shops in the UK, Ireland and Spain, and has plans to open 16 new shops a year for the next two years in the UK and Ireland.

In September 2015, Poundland took over rival 99p Stores but has since seen a slowdown in sales.