Manchester sportswear chain swoops for rival in £90m deal

Manchester based JD sports is set to swallow up its smaller rival Footasylum in a deal worth just over £90m.

A Stock Market announcement was made this morning which revealed that the two firms have agreed a deal.

Under the terms of the deal Bury based JD Sports will buy rival Footasylum for £90.1m.

The offer of 82.5p per share represents a 77.4% premium on Footasylum’s Friday closing price of 46.5p.

JD Sport says that Footasylum is a well-established business with a strong reputation for lifestyle fashion with its offering targeted at a slightly older consumer to JD’s existing offering.

The Bury based firm said there will be significant operational and strategic benefits from a combination of the two businesses.

The company added that the acquisition represents a “compelling opportunity for Footasylum’s employees, management team, shareholders and other stakeholders”.

Footasylum will be able to leverage JD’s greater scale with regard to sourcing, its well-established international infrastructure and its other commercial operations.

JD Sports said it expects the enlarged business will be able to take advantage of business opportunities which are not readily available to either JD or Footasylum on a standalone basis.

Footasylum Directors, who have been advised by GCA Altium on the financial terms of the offer, consider the terms of the offer to be fair and reasonable.

As a result Footasylum directors intend to recommend unanimously that the deal is accepted.

The announcement comes a month after JD Sports acquired an 18.7% stake in Footasylum.

At the time JD said it had no intention of making an offer for the business.

JD Sport is the largest firm of its kind in the UK and is a specialist multi-channel retailer of fashionable branded sports and casual wear.

It has over 2,400 stores across a number of retail brands in 18 countries and aims always to provide its customers with the latest products from leading brands.

Rochdale based Footasylum was founded in 2005 and focuses on the footwear and sports clothing market.

It retails “on-trend” product ranges which are predominantly aimed at 16 to 24-year-old fashion-conscious customers and are sourced from an extensive stable of third party and own brands.

These include well-known sports and casual footwear and apparel brands, as well as up-and-coming brands and own label products.

Peter Cowgill, executive chairman of JD Sports, said: “We are pleased to make this Offer for Footasylum, which is very complementary to our existing businesses in the UK.

“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.”

Barry Bown, executive chairman of Footasylum, said: “The Footasylum Board has concluded that the offer represents the best strategic option for Footasylum and its employees.

“It believes the offer fairly reflects Footasylum’s current market position and prospects on a standalone basis and, as such, that Footasylum shareholders should be given the opportunity to realise value from the Offer.”

Law firm Addleshaw Goddard is advising JD Sports Fashion on its takeover offer for Footasylum.

The team is an all Manchester one and is being led partner Roger Hart and includes Rabia Burton, David Auty and Millie Johnson.

Footasylum was founded in Cheshire in 2005 by David Makin, who previously set up the more successful JD Sports chain with his business partner John Wardle in 1981.

Footasylum has 70 stores and issued a profit warning in January, which it blamed on tough Christmas trading conditions.

In contrast JD Sports, which owns Blacks, Millets, Size and Go Outdoors has enjoyed strong trading in recent months.

Russ Mould, investment director at Manchester investment firm AJ Bell, said: “Given it snapped up an 18.7% stake in the company in February, today’s £90.1m bid for Footasylum from JD Sports is perhaps not that surprising.

“However, the company was categorical last month that it wouldn’t make a full takeover offer.

“Some observers felt the investment was an attempt to block Mike Ashley’s Sports Direct from swooping for a direct rival.

“Whether JD’s denials were true at the time, or a classic piece of misdirection, the rationale for the full takeover appears to be that Footasylum offers exposure to a slightly older demographic than the younger teenagers which typically shop in JD stores.

“On the face of it, the offer looks pretty generous, even if it is a long way short of Footasylum’s market value at IPO of £171m.

“It has been vulnerable for some time and arguably this move could have happened earlier. Perhaps the involvement of JD’s founders, David Makin and John Wardle, in the company was a complicating factor.

“After years of strong growth, JD shareholders will be hoping the company isn’t tripped up by its recent acquisition moves.”

He added: “Early signs from its 2018 purchase of Finish Line in the US have been positive, but both it and Footaslyum were troubled businesses before being taken over.

“As such there has to be some risk they could dilute what has been a highly effective strategy of tapping into the ‘athleisure’ trend.”