OFT examines Ashley’s JJB stake

THE competition watchdog is to investigate the purchase of a stake in ailing retailer JJB Sports by its major competitor, Sports Direct.

The Office of Fair Trading says its is examining whether Sports Direct- which was founded and is led by Mike Ashley, a close friend and former colleage uf JJB boss Chris Ronnie – had created a “relevant merger situation” by taking a large holding in the Wigan company.

An OFT statement said:”Should it be found to be a relevant merger situation, the OFT will further consider whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services that warrants reference to the Competition Commission for investigation and report.” 

Close links between the two companies continued this week when debt-ridden JJB sold four stores to Sports Direct for more than £3m.

News of the OFT’s interest in the links between the two businesses came amid a fresh fall in JJB’s share price. The stock, which has lost more than 90% of its value in the last four months on fears over its funding position, fell 13% to 13p.

If the OFT feels that Sports Direct has a “material influence” on JJB, it could be forced to reduce its shareholding.

It paid £3.4m to JJB for new shares equivalent to 5% of the company in October, while it has also built an additional 16% holding via contracts for difference.

There are concerns too that JJB may not be able to repay a £20m bridging loan owed to Icelandic bank Kaupthing by the end of this month.

 The company is trying to raise cash to reduce borrowings and could sell its thriving health clubs business to former chairman and majority shareholder Dave Whelan.