LONDON, Oct 17 (Reuters) - Sports Direct , the British sporting goods retailer controlled by billionaire Mike Ashley, has built up a 22 percent stake in rival JJB Sports in what it described as a strategic investment.

Sports Direct, which has a history of taking stakes in rivals, said on Friday it had bought 11.94 million new JJB shares in a placing at 28.5 pence apiece for 3.4 million pounds ($5.9 million).

It also said it held contracts for difference, a form of derivative, for 42.9 million JJB shares at an average price of 29.05 pence a share.

"These strategic investments are consistent with the board's policy of making and retaining strategic investments where, and for so long as, the board believes the investment provides the company with the opportunity to gain a strategic or commercial advantage," Sports Direct, Britain's biggest sporting goods retailer, said in a statement.

JJB, whose shares have fallen since it warned last month that it might breach its bank loan agreements, said it would use the proceeds of the placing to boost its finances.

"Sports Direct approached us with an offer to participate in a placing of new shares," JJB Chief Executive Chris Ronnie said in a statement.

"It will put JJB on a more secure financial footing and provides further flexibility for the board to take positive steps that provide stability for the group in this tough retail environment."

JJB said earlier this week it had received a bid approach for its LifeStyle fashion business, which includes 24 Qube stores and 61 Original Shoe Company outlets.

Newspaper reports have said the bidder is rival JD Sports Fashion , although neither party has commented. Mike Ashley owns an approximate 13 percent stake in JD Sports.

JJB shares closed up 14.9 percent at 32.75 pence on Friday. Sports Direct ended unchanged at 38.25 pence and JD Sports down 3.2 percent at 257.5 pence. (Reporting by Mark Potter; editing by Carol Bishopric)