JD Sports has confirmed speculation that it is in takeover talks with struggling rival JJB Sports, although discussion are at a very early stage.
“There can be no certainty that an offer will be made by JD Sports Fashion for JJB Sports, nor as to the terms on which any offer might be made,” it said.
“The highly preliminary nature of these discussions is such that there can be no certainty that any offer will be made or as to the terms of any offer,” JJB added.
JJB is in financial strife and today confirmed the details of a £31.5m fundraising through a 19 percent increase in shares in issue. The new shares will be issued at 5p. It flagged the placing in December after warning it could breach its bank covenants.
The placing has the support of the company’s two largest shareholders, Harris Associates and Crystal Amber, plus Invesco Perpetual, the largest shareholder in Crystal Amber. Additionally, the Bill & Melinda Gates Foundation Trust and GoldenPeaks Capital have agreed to support the share issue. JJB will move to junior market AIM once the money is raised.
“This fundraising 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,” chairman Mike McTighe said.
Last week, the Financial Services Authority confirmed JJB would get a £455,000 fine for misleading the market over the cost of two acquisitions in 2007 and 2008.
In contrast, fashion sportswear chain JD, which is worth £412m against JJB’s £30m, has sailed through the recent recession. It grew like-for-like sales for the five weeks ended 1 January by 2.5 percent and cumulative like-for-like sales for the 48 weeks rose by 3.1 percent. They were up 2.8 percent in the 30 weeks to 28 August.
Any deal will be complicated by the presence of Mike Ashley’s Sports Direct group, which owns 13 percent of JD Sports.
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