Active wear retailer JD Sports (LON:JD) has agreed to purchase Footasylum (LON:FOOT) in a £90 million deal as its smaller rival struggles for survival amid tough trading conditions.
Shares in Footasylum soared 75% following the announcement.
Founded in 1981, JD Sports is the UK’s second largest sports retailer. It already owns 18.7% of its rival which it purchased in February. The smaller 69-store chain was established in 2005 and sells branded trainers and tops and rivals JD Sports.
Under the deal, JD Sports will pay 82.5p in cash per share in smaller chain.
In a statement, JD Sports said it “believes that Footasylum is a well-established business with a strong reputation for lifestyle fashion and, with its offering targeted at a slightly older consumer to JD’s existing offering, it is complementary to JD. JD also believes that there will be significant operational and strategic benefits from a combination of the two businesses.”
Footasylum is one of many retailers struggling for survival amid tough trading conditions. It released a profit warning in September after its weak summer trading figures. Since it floatation, Footasylum has issued numerous profit warnings.
With 65 high street stores across the UK, the recent difficulties of the retail sector have hit Footasylum. It started the year with another warning, this time on its Christmas earnings, underscoring that it expected its adjusted earnings to lean towards the “lower end of the current range of analyst forecasts.”
Tough trading conditions have not only hit the UK high street, but online retailers have also struggled over the recent months.
“We are pleased to make this Offer for Footasylum, which is very complementary to our existing businesses in the UK. We believe that there will be significant operational and strategic benefits through the combination of the very experienced and knowledgeable management team at Footasylum and our own expertise,” Executive Chairman of JD, Peter Cowgill, commented on the offer.
“The Footasylum Board has concluded that the Offer represents the best strategic option for Footasylum and its employees,” Footasylum’s Executive Chairman Barry Brown also added.
Though Footasylum’s management has agreed to the deal, it does still require approval from its shareholders.
At 10:02 GMT Monday, shares in Footasylum plc (LON:FOOT) were trading at +75.65%.
Shares in JD Sports Fashion plc (LON:JD) were up 0.54% (09:49 GMT).
