Discount chain Poundland is in the takeover sights of South African retailer Steinhoff after the group confirmed it was eyeing a bid and said it had snapped up a 23% stake in the business.
Shares in Poundland surged as much as 7% at one point following the bid interest from Steinhoff, which revealed late on Wednesday that it had bought 61.2 million ordinary shares in the budget retailer.
It also confirmed that its offer for Poundland would be made in cash.
The move marks the latest takeover attempt by Steinhoff, after it lost out in a battle with Sainsbury's to buy Argos owner Home Retail Group in March.
Steinhoff – which owns UK furniture firm Harveys – has until 5pm on July 13 to make a firm bid for Poundland or walk away under City takeover rules.
Poundland said shareholders are "strongly advised to take no action".
Speculation over a potential bid for Poundland had been mounting ahead of the Steinhoff announcement after a stake of around 15% of the group was sold at a 24% premium to the stock price on Tuesday.
While the buyer was not confirmed, the move duly sent shares surging 24% higher.
It comes before Poundland's results on Thursday, when outgoing boss Jim McCarthy will unveil his final set of full-year figures.
The chain has had a testing year following sales falls and a difficult takeover of rival 99p Stores.
The group is expected to report an 11% drop in underlying pre-tax profits to £38.7 million for the year to March 27 after seeing sales decline pick up pace in the final six months.
Like-for-like sales decreased by 3.9% over the full year, but the fall was steeper in the second half, at 4.9%.
A potential bid from Steinhoff gives new Poundland boss Kevin O'Byrne an eventful start to his tenure at the top.
The former B&Q UK and Ireland boss takes over from Mr McCarthy on July 1, having joined as chief executive designate in April.
But Mr McCarthy will remain with the group until his retirement at the firm's annual shareholder meeting in September.
Steinhoff appears determined to expand further across Europe, having tried and failed to gatecrash two deals in recent months.
As well as seeking to muscle in on the Sainsbury's deal for Home Retail, it also barged in on French retailer Fnac's takeover of London-listed white goods retailer Darty, although it was ultimately out-bid.
Steinhoff is backed by South African retail billionaire Christo Wiese, whose Brait investment group also owns controlling stakes in Virgin Active, New Look and food chain Iceland.
Steinhoff also owns Bensons for Beds in the UK and Conforama in France, as well as a number of retailers across Europe, Australasia and Africa.
Its interest in Poundland comes after the set-price retailer's shares had fallen by a third in a year following tough trading.
Poundland warned over profits in January after Christmas trading was hit by poor numbers of shoppers on the high street, and trading has remained under pressure since then.
The group's transformational £55 million takeover of 99p Stores has also proved to be far from smooth.
It finally received the all-clear for the deal from the competition watchdog last September, but Mr McCarthy has since admitted that 99p Stores was ''in a mess'' when it was handed over.