JD Sports purchase of Footasylum sees in-depth probe
It looks like JD Sports’ £90 million acquisition of troubled smaller peer Footasylum isn’t going to go through easily with news on Thursday that the Competition and Markets Authority (CMA), which had been investigating the deal, could be ready to move on with a phase two probe. It has concerns that the purchase would erode competition in the market. That would mean an in-depth look at the deal and just how much it might be likely to dent competition.
The CMA thinks the deal might actually “result in a worse deal for customers, both in-store and online, through higher prices, worse choice in stores or reductions in service quality” and it wants JD Sports to "address the concerns identified or face a further, more in-depth, investigation.”
Given JD Sports’ huge size and its number one position in the sports fashion sector, it was always likely that a purchase of a retailer operating in the same category would attract CMA attention.
JD Sports has over 400 UK stores while Footasylum has only around 70 and while the former has been going from strength to strength, Footasyulm has struggled for some time. When it listed on the stock market around two years ago, it was valued at £170 million but its share price fell on news of tough trading and the JD Sports deal was seen largely as a rescue for the firm.
On Thursday, JD Sports’ chairman Peter Cowgill said: “We continue to believe that Footasylum would be a positive addition to the group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business. We also believe that there will be significant operational and strategic benefits from a combination of the two businesses.
“Our discussions with the CMA are ongoing as we consider whether to proceed to Phase 2 or if acceptable remedies can be agreed at this stage. We look forward to working constructively with the CMA in this regard and will provide further updates in due course.”
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