Struggling sporting retailer in takeover talks with rival

JD Sports approached its struggling competitor last month with a potential, undisclosed offer but warned there could be no certainty that a deal would be sealed.

The takeover interest comes as JJB battles for survival in the face of deteriorating trade and as it looks to raise millions of pounds of support from key shareholders.

JJB, which employs 6,300 staff in more than 250 stores, reported an 11.1 per cent decline in like-for-like sales from December 20 to January 23 after a similarly dismal performance over Christmas.

Analysts said JD Sports, which in contrast has maintained like-for-like growth through the weather-hit festive season, could afford to buy JJB Sports.

At 30m, JJB Sports' value is considerably less than JD's market value of 400m.

Mark Photiades, analyst at Singer Capital, said the entire exercise could cost JD up to 100m to complete.

"We believe that JD will have been looking at JJB Sports since their troubles began and will be looking to take advantage of the business's current weakness," he said.

However, Mr Photiades also said competition concerns may be raised, considering the 12 per cent share Mike Ashley's Sports Direct holds in JD.

But Freddie George, retail analyst at Seymour Pierce, said there was little overlap in the store formats as JD's format is focused on sports fashion where JJB is striving to be viewed as a sportswear specialist. He said: "JJB Sports' current trading had been very weak and it was clear the company needed further funding to survive. However, we believe there would be significant opportunity for synergies between the two businesses."

JJB has struggled in the last couple of years, during which it has been the subject of separate investigations by the Serious Fraud Office, the Office of Fair Trading and the Financial Services Authority.

The retailer recently revealed that a major promotional drive failed to deliver results.

The company said it was going ahead with plans to raise 31.5m through Harris Associates and Crystal Amber, the company's two largest shareholders and with Bill & Melinda Gates Foundation Trust.

JD Sports has around 350 stores under the JD and Size? brands, as well as 100 fashion outlets through the Scotts and Bank fascias and 75 Chausport shops in France.

It is 57 per cent owned by private brand-management giant Pentland, which owns or has shares in major labels including Speedo, Berghaus, Boxfresh and Red or Dead.

JJB plans to use the 31.5m cash raising to develop its revised business plan, which will include further restructuring of the business.

But the move is subject to the approval of shareholders at a general meeting on February 18.

Mike McTighe, JJB chairman, said: "Trading remains challenging but we are convinced that JJB can have a successful future once it has been restructured."

The company has also persuaded Bank of Scotland to waive covenants in January and April as it sorts out its finances.

The two major shareholders backing the capital raising have multimillion-pound investment portfolios.

Harris Associates, a private US investment giant which has a 20 per cent stake in JJB, had 37.9bn of assets under management at December 31.

Crystal Amber is an activist investor registered in Guernsey. The company, which was listed on the AIM market in 2008 with a market value of 60m, holds a 15.8 per cent stake in JJB. Crystal Amber owns stakes in Pinewood film studios.

[email protected]

takeover interest: JD Sports' market value is 400m.

: Caption xxxxxxxxxxx xxxxxxxxxxxxxxxx xxxx xxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxx.picture: xxxx xxxxxx