UK sports apparel retailer JD Sports Fashion Plc is to acquire struggling rival Footasylum in a GBP90.1m (US$119.4m) deal.
The announcement comes exactly a month after JD Sports upped its stake in Footasylum to 18.7% and said it was prepared to acquire an aggregate interest of 29.9% but denied it had any intention of submitting a takeover bid.
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In 2017 Footasylum listed on the AIM, shortly after its owners had been mulling a sale of the company. On listing, its stock began trading at GBP1.64, and in January 2018 its share price rose to GBP2.73. However, like much of the UK high street, which has been hit by tough retail conditions, Footasylum issued several profit warnings in 2018, and another in January 2019. Its shares have since fallen almost 90%.
On today’s announcement, its shares surged to 74.67% to GBP81.22p per share
The acquisition includes 69 Footasylum stores. JD Sports said it expected the combined group to be able to take advantage of business opportunities not readily available to either individually.
Peter Cowgill, executive chairman of JD Sports, said he believed there were “significant operational and strategic benefits” as a result of the tie-up.
“JD believes that Footasylum is a well-established business with a strong reputation for lifestyle fashion and, with its offering targeted at a slightly older consumer to JD’s existing offering, it is complementary to JD. JD also believes that there will be significant operational and strategic benefits from a combination of the two businesses.
“JD believes that the acquisition represents a compelling opportunity for Footasylum’s employees, management team, shareholders and other stakeholders, with Footasylum able to leverage JD’s greater scale with regard to sourcing, its well-established international infrastructure and its other commercial operations.”
Footasulym’s executive chairman, Barry Bown, added the offer represented “the best strategic offer” for Footasylum and its employees.
The move has been welcomed by the analyst community.
Catherine Shuttleworth, CEO at shopper marketing agency Savvy, said the move that will add valuable space to the JD estate. “This consolidation of the sector shows JD Sports resilience and customer appeal in an otherwise fairly depressing retail landscape. Whilst acknowledging that physical retail remains a challenging market in which to operate, JD have returned positive results and are providing their customers with what they want in a place they want to see it. By merging Footasylum into their ecosystem, this acquisition looks like a smart move.”
Greg Lawless, retail analyst at Shore Capital, added: “In our view, this looks a sensible bolt-on acquisition in the UK to the JD Sports group which crystallises the strategic stake that the company acquired back in February in Footasylum. It brings a further fascia to the group and by leveraging JD’s infrastructure and sourcing capabilities will be able to drive out operating synergies, which can potentially be reinvested in the offer.”
JD Sports Fashion is a leading distributor of branded sportswear and fashionwear with over 2,400 stores across a number of retail fascias. In Sports Fashion these include JD, Footpatrol, Size?, Sprinter and Tessuti; while its Outdoor formats include Blacks, Millets and GoOutdoors.
In June last year the group completed its US$558m acquisition of US athleticwear chain The Finish Line, and plans to convert up to 15 further Finish Line stores to the JD fascia in the first half of 2019.
