Poundland agreed to buy 99p Stores for £55 million as it seeks to boost its presence in the booming UK discount-retail industry.

The proposed deal will add a business with more than 2 million weekly customers and 251 stores, the company said today in a statement.

Poundland serves an average of 5 million customers a week from almost 600 outlets.

“Through working together, Poundland will improve choice, value and service for 99p Stores’ customers,” chief executive officer Jim McCarthy said in the statement.

Poundland expects the deal to boost earnings per share after full integration. The transaction illustrates the attraction of discount retailing in the UK as a growing number of shoppers switch to bargain stores.

Poundland, which sold shares in an initial public offering last year, has said it sees potential for more than 1,000 stores in the UK.

The purchase of 99p Stores, which had sales of £370.4 million in the year to February 1, 2014, is conditional on approval from the UK Competition and Markets Authority.

Discussions have already been held with the regulator, which may ask Poundland to address any impact on competition, the company said.

The CMA’s review process is expected to take at least two months. “The proposed transaction is conditional on an outcome of this CMA process that is acceptable to Poundland and to the CMA,” Poundland said in the statement.

About £47.5 million of the purchase price will be paid in cash to be funded by a sale of equity and increased bank facilities.

The remainder will be settled by the issue of new shares, according to the statement.

Bloomberg