JD Sports, Britain’s biggest sports retailer, has agreed to buy its struggling smaller rival Footasylum for £90.1m.
It is to pay 82.5p in cash for each share in the footwear and hoodie chain, in which it already owns an 18.7% stake, acquired last month.
Shares in the Aim-listed retailer jumped 74% to 81.5p on the news, still far below the flotation price of 164p in November 2017, when Footasylum was valued at £171m. The 70-store chain, which focuses on selling branded trainers and tops to 16- to 24-year-olds, has issued a number of profit warnings since it floated.
Peter Cowgill, the executive chairman of JD Sports, said: “We believe that there will be significant operational and strategic benefits through the combination of the very experienced and knowledgeable management team at Footasylum and our own expertise.”
The company declined to comment on potential job losses, saying that any decisions would be made after a strategic review. It stressed that the working terms of Footasylum’s 2,400 staff, all in the UK, would be unchanged. JD Sports, which owns Blacks, Millets, Size and Go Outdoors, has 30,292 staff across 2,400 stores in 18 countries.
It added: “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.”
Footasylum was founded as a single shop in Cheshire in 2005 by David Makin, who had set up the JD Sports chain with his business partner John Wardle in 1981. Wardle joined Makin at Footasylum in 2008 and became its chief executive, rising to chairman in 2015, a role that he held until last year. He was succeeded last summer as executive chairman by Barry Bown, the former chief executive of JD Sports.
Footasylum is majority-owned by the Makin family, who are backing the deal with irrevocable undertakings for their combined stakes of 63%. Makin’s daughter Clare Nesbitt, who is on maternity leave, is the firm’s chief executive and largest shareholder, with a 20.6% stake. Her siblings, Tom Makin, the company’s marketing and e-commerce director, and Amy Mason, are also major shareholders, while their father holds a 6% stake.
While JD Sports has thrived on the back of the “athleisure” boom – sportswear designed to be worn outside the gym – Footasylum has struggled and slid to a first-half pre-tax loss of £4m last autumn. It issued a profit warning for the full year after a poor Christmas.
Both retailers are headquartered in Greater Manchester and JD Sports said there could be cost savings by moving some of Footasylum’s headquarters operations to its own base.
The independent retail analyst Nick Bubb said: “It is hard to know why JD has taken so long to take advantage of Footasylum’s problems, but JD has been busy with its big US acquisition.” It bought US retailer Finish Line for $558m (£422m) last summer.
Retail analysts Greg Lawless and Clive Black at Shore Capital said: “This looks to be a complementary fascia which can benefit from JD’s sourcing scale, infrastructure and potential international opportunity.”
Russ Mould, an investment director at stockbroker AJ Bell, added: “Some observers felt the investment was an attempt to block Mike Ashley’s Sports Direct from swooping for a direct rival.”
