Sports Direct takes 5% in JJB
SHARES in JJB Sports have continued to rally after Mike Ashley’s Sports Direct International increased its stake by 5%, pumping £3.4m into the embattled retailer.
The move followed the decision of four of JJB’s directors to buy shares. Chairman Roger Lane-Smith, deputy chairman David Jones and non-executive directors Alan Benzie and David Beever all beefed up their stakes in the group last Wednesday and Thursday.
This morning JJB said it has placed nearly 12 million new ordinary shares worth 28.5p each with Sports Direct, a rival retail chain.
It said it would use the cash for general working capital and to strengthen its financial postition.
The deal lifts Sports Direct’s holding to around 20% as it already has contracts for difference in respect of 42.8m shares, representing more than 15% of JJB.
Contracts for difference are controversial derivatives under which the holder benefits from any share price rise and has control of the voting rights. However the purchaser typically pays just 10% of the value of the underlying stake.
JJB’s chief executive Chris Ronnie used to work with Mr Ashley, who owns Newcastle United and is the majority shareholder of Sports Direct.
In a statement Mr Ronnie, said: “Sports Direct approached us with an offer to participate in a placing of new shares. It will put JJB on a more secure financial footing and provides further flexibility for the board to take positive steps that provide stability for the group in this tough retail environment.”
He added: “Sports Direct has a track record of acquiring stakes in other listed companies, including JD Sports Fashion and Blacks Leisure Group.”
On Wednesday Roger Lane-Smith spent £29,500 on 100,000 shares at 29.5p. The following day David Jones put about £60,000 into 200,000 shares priced between 28-30p; Alan Benzie invested £13,500 in 50,000 shares and David Beever spent £22,400 on 70,000.
The company has had a torrid time since unveiling half-year losses of nearly £10m. Its share price has dived from around £1.50 to 18p in a year, but reached 38p in early trading today.
