AROUND 2,200 staff at JJB Sports were made redundant yesterday after administrator KPMG finally closed down 133 of the stricken retailer’s stores and sold the remaining 20 shops to Sports Direct.
The rival group, controlled by Newcastle United football club owner Mike Ashley, has bought the JJB brand, its stock, as well as the Slazenger Golf brand for £24m in a deal that will save just 550 jobs.
Prior to yesterday’s announcement, it had been hoped that a deal could be negotiated that would see Sports Direct buy as many as 60 stores.
But a source close to the process told City A.M yesterday that Sports Direct had drawn the line at 20 outlets over fears that it would come under investigation by the Office of Fair Trading. It could, however, still consider buying more stores from leaseholders in the following weeks.
JJB, founded by ex-footballer Dave Whelan in 1971, was forced to put itself up for sale in August after a long-running battle against sliding sales, fierce competition and rising debt.
Worth more than £1bn in its heyday, the group had to be thrown a £20m lifeline six months ago by US retailer Dick’s Sporting Goods, followed by a further £10m from existing shareholders including the Bill & Melinda Gates Foundation. Just three months later, Dick’s announced that it had written off the investment, saying JJB’s sales had “materially deteriorated from its expectations”.
JJB was forced to call in KPMG to handle the sale process after admitting it would be unable to raise the fresh funds needed to turn itself around.
David McCorquodale, the corporate finance partner at KPMG who led the sales process, said more than eight trade and private equity players had tabled first round bids.
“Unfortunately the level of cash and further operational restructuring required to rescue a more substantial part of the business was too much risk for most interested parties,” he said.
Once a profitable household name, JJB’s £36m debt pile dates back to a string of acquisitions made under its previous chief executive Chris Ronnie between 2007 and 2009. The onset of the financial crisis meant the firm soon found itself unable to recover and was rescued twice by its landlords in 2009 and 2011.
Liz Peace, chief executive of the British Property Federation, said yesterday: “Having played their part in twice saving JJB from administration, taking a financial hit in the process, landlords will be understandably frustrated and left wondering whether the pain was really worth it.”
In 2011, landlords were offered a payment of between £2.5m and £7.5m, to be paid in cash or JJB shares by April 2013, for backing a rescue plan to prevent administration.
According to KPMG, such a payment is now completely off the table.