JD Sports in "transformational" Finish Line buy
JD Sports is riding high at the moment and that’s making it acquisition-hungry. The latest? US-based The Finish Line, with the company having entered a “conditional acquisition agreement to acquire 100% of the issued share capital” of the firm this weekend.
It will pay $13.50 a share, which is big premium compared to the $10.55 the shares closed at on Friday, although less than the $14.90 they hit on the first trading day of January. Anyway, it all adds up to a value of around $558 million/£396 million, compared to a market capitalisation of around $425 million/£301 million based on that Friday closing price.
And it also adds up to a game-changer for JD Sports. JD is one of the UK’s biggest names and has been growing in Europe and Asia-Pacific too with recent acquisition activity in Spain and Portugal. But Finish Line is one of the largest retailers of premium multi-branded athletic footwear, apparel and accessories in the US, which is the largest sportswear market in the world.
It trades from 556 Finish Line branded retail stores across 44 US states and Puerto Rico, in addition to having a well-established web offer. It’s also the exclusive retailer of athletic shoes, both in-store and online for Macy’s, with 375 branded and 188 unbranded concessions within Macy's stores.
Clearly, JD Sports’ ambitions are far from limited and “the opportunity to expand its market-leading elevated proposition into the most significant global market,” seems to good to pass up.
JD said it “immediately gains the benefit of a significant physical and online retail presence” but perhaps more significantly, it “increases the importance of the company to its major international brand partners.”
It said that on completion of the acquisition, the company will “focus on bringing JD's highly differentiated multi-channel retail proposition to the US market.”
In the last year for which we have figures (the 12 months to February 2017), Finish Line had revenues of $1.84 billion and pre-tax profit of $54 million, but it’s clearly challenged on the sales front as JD said that Finish Line’s revenues in the years to March 3 2018 were still $1.84 billion.
JD must be thinking it can change that and with some justification as it has consistently posted strong sales and profits rises. The company that rival Mike Ashley of Sports Direct once said he would “finish off” has had a Midas Touch when it comes to retailing sports product in a market facing unprecedented challenges.
That news should come as some relief to the 3,700 full-time and around 9,300 part-time Finish Line staff and, indeed, to the company’s executive team which “will continue their involvement with the business following the acquisition.”
Saying that the purchase should complete during June (as long as both sets of shareholders approve and no issues arise), JD’s executive chairman Peter Cowgill said: “Finish Line has many similarities to JD with a strong bricks and mortar offering complemented by an advanced and well-invested digital platform. Our combined extensive knowledge of the retail market and our product and marketing relationships with global brand partners will benefit our customers, in turn supporting the continued future growth of JD.”
He also said it’s “a landmark day for JD and will be transformational for the business."
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