Poundland is set to buy rival 99p Stores in a £55m cash and shares deal 14 years after the family-run chain was founded.
It now has 251 shops, which trade as 99p Stores and Family Bargains and serve more than two million customers.
Annual sales were £370.4 million in the year to February 1 last year and underlying earnings were £6.1m.
Poundland, which floated on the stock market last year, will also pick up a warehouse and distribution centre in the transaction.
Chief executive Jim McCarthy said: “This is a good deal for both businesses and will benefit customers and shareholders.
“Through working together, Poundland will improve choice, value and service for 99p Stores’ customers, bringing Poundland’s know-how and range to 99p Stores.”
Family-run 99p Stores was founded by Nadir Lalani with a single site in Holloway, north London, in 2001, helped by sons Hussein and Faisal, before opening a further three stores later that year.
It has grown rapidly in recent years following the demise of Woolworths in 2008 as bargain retailers have become regular fixtures in UK high streets.
Poundland is paying £47.5m in cash plus £7.5m in new shares. The deal will be partly funded by a share placing.
The firm said the deal was dependent on the approval of the Competition and Markets Authority (CMA) and talks with the regulator have already been held.
Poundland describes itself as Europe’s largest single price value retailer. It has opened nearly 600 stores in the UK, Republic of Ireland and Spain since 1990 – trading in the latter two countries under the Dealz brand.