Discount chain Poundland has announced a £597m takeover agreement with South African retail group Steinhoff International.

The announcement comes after Poundland revealed a 4.9% drop in like-for-like sales in its fourth trading statement of the year ending March 27, attributing the decline to the challenging financial climate combined with disruption following the retail takeover of 99p Stores in 2015.

Shares in Poundland had fallen from 418p in February to below 200p. Steinhoff is paying 222p per share.

Poundland reached an agreement with Steinhoff, which owns 40 retail brands including Bensons for Beds and Harveys furniture stores, after previously rejecting an offer last month. Steinhoff already owned a 23% stake in Poundland before the takeover was agreed.

Darren Shapland, chairman of Poundland, said: “The Poundland Board believes that Steinhoff’s all-cash offer presents Poundland shareholders with an opportunity to realise their shareholding at a certain and attractive price, securing earlier delivery of the Poundland Group’s medium term value than could be expected from the ongoing turnaround process against a background of increasing economic uncertainty in the UK and a more challenging trading environment.”

Markus Jooste, CEO of Steinhoff, said: “The Board of Steinhoff and its management team are enthusiastic about the opportunities that this transaction brings: we believe that there is significant merit in bringing Poundland into Steinhoff’s global network. Steinhoff is developing a fast-growing, price-led retail business across the UK and the rest of Europe. Poundland would be a complementary fit to this growth story.

“Steinhoff recognises the strength and value of the Poundland management team and anticipates that they will play a key role in the ongoing growth and development of Poundland as part of the Steinhoff group. We look forward to welcoming Poundland employees to be part of one of Europe’s leading multi-format discount retailers.”

Since 1990, Poundland has opened more than 750 stores across the UK, Ireland and Spain.