JJB Sports takes step on road to survival with £31.5m placing

Struggling sportswear retailer JJB Sports has raised £31.5m in a share sale that represents an essential first step towards survival.

The firm, in which America’s richest man Bill Gates holds a stake of about 5.5 per cent, said the cash was raised in a firm placing and a placing and open offer of 630 million shares at 5p each.

Of the 315 million shares in the open offer, acceptances of just 3.7 per cent were received, with the balance of 96.3 per cent allocated to shareholders which backed JJB’s firm placing, including its two largest investors Harris Associates and Crystal Amber.

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The capital raising was backed by JJB’s shareholders on Friday.

JJB has said it requires a larger capital raising, in addition to the £31.5m, along with creditor and investor support for a second company voluntary arrangement (CVA) in as many years if it is to avoid going into administra- tion.

The second CVA proposes the closure of up to 95 JJB stores and the retention of a core group of 150 stores.

The firm, which employs about 6,300 staff, is also in takeover talks with thriving rival JD Sports Fashion.

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Shares in JJB, which have lost two thirds of their value over the last year, closed last night at 32p, a fall of 17 per cent or 6.6p.

Earlier this month, JJB said it plans to close another 45 stores as it proposed the second CVA to creditors to keep the business afloat.

The firm said approval from shareholders and creditors of its new CVA would let it continue trading while striking a deal with landlords to close stores and pay only part of the rent.

It warned it would “no longer be able to trade as a going concern, which would result in the appointment of receivers, liquidators or administrators”, without the additional £31.5m cash.

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JJB was driven to the brink during the recession, but survived thanks to a deal to sell its fitness clubs to founder Dave Whelan, an earlier CVA that saw it close 140 stores, new banking facilities and an earlier equity fundraising.

In addition to 45 stores identified for closure, its latest CVA would see 50 stores put under review for possible closure.

To become effective, JJB’s proposals needed the backing of 75 per cent of unsecured creditors and 50 per cent of shareholders.

JJB’s talks with JD were described as “highly preliminary”.

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Analysts are sceptical a deal will emerge given that JD may prefer to wait and see if JJB survives.

Last week Sports Direct, Britain’s biggest sporting goods retailer, said it was trading well after a robust third quarter, ratcheting up the pressure on JJB Sports.

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