Having bought a total 18.7 per cent stake in struggling rival Footasylum (FOOT) last month, JD Sports (JD.) has now offered to buy the entire company for £90m. The high-street chain said it acquired last month’s stake “for investment purposes” but, at the time, said it was only prepared to build “an aggregate interest of 29.9 per cent” – just shy of the threshold that would trigger an automatic bid. Now, JD Sports has offered the company and its shareholders 82.5p a share – a whopping 77 per cent premium to the shares’ last business day closing price prior to the announcement. In response, Footasylum's shares rose by more than three-quarters in a single day’s trading.
JD Sports' chairman, Peter Cowgill, called the deal “very complementary” to JD’s existing UK business, while analysts at Shore Capital think management views Footasylum as a “well-established business with a strong reputation for lifestyle fashion”, whose target customer is “slightly older” than JD Sports’. Suffice to say the deal will offer JD plenty of new stores, which can, in the broker’s view, benefit from the acquirer’s sourcing scale and existing infrastructure. For that reason, the enlarged group should drive significant operating synergies.
Footasylum chief executive Claire Nesbitt’s father, David Makin, helped found both JD Sports and Footasylum, while its current chairman, Barry Brown, served as chief executive of JD Sports between 2000 and 2014. Currently, Mr Makin, Ms Nesbitt, her sister Amy and brother Tom each hold stakes of more than 6 per cent in Footasylum, while the Makin children are all beneficiaries of The John Wardle 2016 Settlement, which owns a 34.6 per cent holding. Together, that gives the Makin family control of more than 63 per cent of Footasylum.
The group issued a string of profit warnings last year – most recently in January – as prolonged discounting weighed on margins, causing the share price to halve over the past 12 months. By contrast, JD Sports has defied much of the UK retail doom and gloom, reporting a 15 per cent rise in sales over the 48 weeks to 5 January 2019, with like-for-like growth in excess of 5 per cent.
