JJB Sports put up for sale amid funding woes
CRISIS-hit retailer JJB Sports has hoisted the For Sale sign today as it had failed to persuade its shareholders and suppliers to inject further funds to support its turnaround.
The Wigan company which has around 4,000 staff and 200 shops has appointed KPMG to conduct a formal sale process, but warned shareholders that because the business has high levels of debt there is chance their investments could be rendered worthless.
JJB said that since its latest poor trading update it had continued its discussions with its strategic partners regarding a further fund raising and restructuring of its stores to enable a rival of its fortunes.
In a gloomy statement it said this had failed: “However, following these discussions, the directors do not believe that the company will be able to raise the level of funds required to implement the turnaround.
“As a result, the board has decided to conduct a formal sale process of the company and now wishes to invite offers to support further investment in the company, which may result in a sale of the company or its assets.
On the question of value for shareholders, JJB added: “Given the level of current debt within the company, there can be no assurance that any proposal or offer that may be made would attribute value to the ordinary shares.”
The company, once the biggest in the sports retail market, now has a stock market value of less than £10m. Shares closed on Wednesday close to an all-time low of 2.37p and slumped 76% to just 0.56p after the announcement.
The retailer added that in the six weeks to August 26 like-for-like sales have decreased by 3.3% and like-for-like cash margin has decreased by 9.5%.
Many observers now believe that barring a miracle, the group will run out of cash and be placed into administration, with a pre-pack deal to shed debts and cherry-pick the best performing stores one likely outcome.
David McCorquodale, the KPMG corporate finance partner leading the JJB sale process was more upbeat, stating: “While it is very early days, I anticipate significant interest in the opportunity to acquire this leading multichannel authentic sports retailer.
“There is a real place on the British High Street for a retailer of performance gear for the sports enthusiast.”
JJB Sports has had a troubled recent past. Its biggest problem has been the dramatic rise of Mike Ashley’s Sports Direct over the last decade, and also the success of JD Sports Fashion at the higher end of the sports retail market.
It has gone through two CVA deals over the last three years to rid itself of onerous leases for poor-performing stores, while its lender HBOS – now Lloyds – has been patient in the extreme. Major shareholders which include the Bill Gates Foundation have pumped in tens of millions of pounds to support previous turnaround attempts.
As of August 28 JJB’s net bank debt was £16.5m. it also has £18.75m of convertible loan notes outstanding and has also drawn down £1.1m under a trade loan facility with its suppliers.
