JD in talks to buy troubled retailer JJB

 
Steve Dinneen
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JD Sports is in talks to buy troubled retailer JJB Sports, sending shares in the Wigan-based firm soaring 17 per cent.

The news comes as JJB confirmed it will raise £31.5m from shareholders through the placement of 630m new shares, with sources close to the firm warning it may need further help within weeks.

The placing of the new shares will provide a cash injection of £30m after fees, which the firm says will buy it time to complete a revised business plan, settle some of its outstanding debt and allow it to remain trading – for the time being.

Harris Associates and Crystal Amber – JJB’s two largest shareholders – have said they will both support the action, as will Invesco Perpetual, the Bill & Melinda Gates Foundation and GoldenPeaks Capital.

Harris Associates and Crystal Amber will be granted the right to nominate a non-executive director to the board.

The firm’s lender, Bank of Scotland, has already agreed to give the firm leeway in regards to its existing debt facilities.

With JJB having lost 79 per cent of its pre-speculation value in the last year, the takeover talks will be seen by some investors as a light at the end of the tunnel.

Both firms said the talks are “highly preliminary” and both declined to discuss valuations. One source close to the talks told City A.M. “JD is driving this bus, JJB will just have to see if it arrives.”

Analysts pointed to the obvious synergies a merged entity could achieve, with head-office integration and greater bargaining power with suppliers among them.

JD, which has 500 stores, has refocused its attention on the “fashion” end of the sportswear market, with JJB a more direct competitor with Mike Ashley’s Sports Direct. Ashley owns an 11.9 per cent stake in JD.

MELANIE GEE
LAZARD

MELANIE Gee is advising JJB for Lazard. She joined the firm as a managing director in its UK investment banking business from UBS, where she was a managing director and senior relationship banker.

She has advised on a number of major transactions, including the sale of BAA to a consortium led by Gruppo Ferrovial, the sale of Exel to Deutsche Post, the Irish government on the privatisation of Aer Lingus and the sale of Christian Salvesen to Norbert Dentressangle.

She began her investment-banking career in 1982 at SG Warburg in London, which ultimately became part of UBS. She was named managing director in 1999.

She has worked across a broad range of industries and geographies, and was formerly joint global head of UBS’ transport sector.

In addition she was responsible for setting up its mid market group, and establishing a corporate finance capability for UBS private bank.

Gee earned an MA in mathematics from Somerville College, Oxford.

Also advising for Lazard is Charlie Foreman.

JJB | THE FALTERING PATH OF THE SPORTSWEAR RETAILER

8 June 2007
Former owner Dave Whelan sells his residual 29 per cent stake in the firm for £190m to Icelandic financial group Exista and Chris Ronnie.

October 2008
JJB’s shares fall to a tenth of their value after Whelan’s share sale.

10 February 2009
JJB, unable to find a buyer, puts both Qubefootwear and Original Shoe Company into administration.

9 December 2009
JD Sports sells its 10 per cent stake in JJB for £16.3m, unwinding part of the complex web of cross-shareholdings in the sports retail industry.

26 January 2011
JJB is fined £445,000 by the financial regulator for misleading the market by understating the cost of two acquisitions. JJB said in 2007 it had bought Original Shoe Company for £5m but failed to disclose at the time it also paid more than £10m for in-store stock. A year later, the group said it bought Qubefootwear for £1 but failed to mention it had also settled Qube’s £6.47m overdraft.

2 February 2011
JJB confirms it will raise £31.5m through the placement of new shares. The scheme is backed by its major shareholders.