JD Sports to buy U.S. sportswear retailer Finish Line
Mar 27 2018
"We are thrilled to partner with them and look forward to realising the impact we will have on the marketplace together".
JD Sports sees the US market as a highly attractive growth opportunity, and it aims to bring "a differentiated multichannel retail proposition" to this market.
JD Executive Chairman Peter Cowgill says the deal is "a clear next step" for the company's global ambitions.
The takeover, which offers JD an opportunity to expand its footprint into the world's largest sportswear market, is expected to make a "small incremental positive" contribution to its results and earnings per share in the year to February 2, 2019, according to a statement issued by the company. "It immediately offers a major presence in the US, a clear next step to further increase our global scale".
Meanwhile, Bill Carmichael, lead director of the Finish Line board, says the board voted unanimously to approve entering into the merger agreement.
The retailer's move into the largest sportswear market is its boldest yet, increasing JD Sports' importance to global brands, particularly Nike and Adidas.
The deal would snatch away the interest acquired a year ago by United Kingdom sports retailer Sports Direct, which last April acquired a 7.9% stake in Finish Line, making it the US company's fifth-largest shareholder now.
He adds: "Finish Line has many similarities to JD with a strong bricks and mortar offering complemented by an advanced and well-invested digital platform". The deal represents a 28 per cent premium to the closing price of Finish Line's shares on Friday.
Shore Capital analyst Clive Black is similarly enthused, writing: 'JD Sports continues with its worldwide strategy and this transaction will scale that up significantly with enhanced revenues and earnings from a new U.S. division. Finish Line now has 556 stores across 44 states, not including more than 500 selling points in Macy's shops - one of the biggest department stores in the nation.
JD said by significantly increasing the global scale of the company and therefore its importance to its major worldwide brand partners, the deal is expected to bring greater purchasing power and "strategic alignment" in North America with the major worldwide sportswear brands.
The acquisition is expected to be completed "no earlier than" June 2018 and will be funded through a new revolving credit facility for JD.
"Note that JD also indicated plans to open a number of JD branded stores in the USA and to accelerate reimaging of the Finish Line store fleet, both of which may be competitive threats for FL", he pointed out. It's legal advice comes from Barnes & Thornburg LLP and Faegre Baker Daniels LLP. Millennium Management LLC increased its stake in shares of Finish Line by 147.9% in the fourth quarter. Barclays, HSBC Bank and PNC Bank, National Association provided committed financing to JD for the transaction.