JD Sports confirms intention to buy JJB
Troubled retailer JJB in fundraising round
JJB Sports, the leisure sportswear retailer, is continuing takeover talks to raise over £31m in funding, as rival sports fashion retailer JD Sports confirmed it had made a merger offer.
The JD takeover could see the creation of a joint 750 sports and leisurewear store powerhouse that would secure JJB’s future, which was in danger after the Financial Services Authority announced that the retailer would be given a £455,000 fine for misleading the market over the cost of two acquisitions in 2007 and 2008.
In contrast, JD, which is worth over £400m compared to JJB’s £30m, has fared the recession comfortably, reportedly seeing Christmas sales increase by 2.5%, while JJB’s sales were down 16%.
JJB, which has been struggling financially since 2008, is aiming to raise £31.5m by selling 630 million new shares at 5p each. However, shares for JJB surged as speculation surrounding a JD takeover were confirmed, with shares rising to over 30% to 6p, while JD shares fell by 1.5%, to 835p.
JJB chairman Mike McTighe said: “This fund-raising will provide JJB with the short-term funding it needs while we finalise plans for a further restructuring and refinancing. Trading remains challenging but we are convinced that JJB can have a successful future once it has been restructured.”
JJB’s two largest shareholders, Harris Associates and Crystal Amber, plus Invesco Perpetual, the largest shareholder in Crystal Amber, have reportedly given their support and will be able to nominate a non-executive director to the board when the fundraising round is completed.
JJB has also announced that it plans to move its shares from the London Stock Exchange’s main market to the junior market AIM, once the finance is raised.
© Crimson Business Ltd. 2011