SHARES in Footasylum rose after JD Sports signalled it is to buy its fellow High Street footwear chain for more than £90 million.
Footasylum shares were up 34.9p to 81.4p and JD Sports shares rose 5.4p to 491.4p.
JD Sports is likely to look to long-term investment in Footasylum and the agreed acquisition is complementary, according to one Scottish analyst who said it should help benefit both businesses.
The sportswear chain said it has agreed to pay 82.5p per share for the company, marking a 77.4 per cent increase on Footasylum’s closing price of 46.5p last week.
It is about half of what Footasylum had been valued at when it went public in late 2017.
Footasylum, which has stores in Glasgow and Dundee, was founded in 2005 by David Makin, one of the co-founders of JD Sports.
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John Wardle, the other co-founder of JD Sports, also joined Footasylum and was chief executive for seven years, before becoming executive chairman.
JD Sports said it expects the combined business to be able to take advantage of opportunities not available to either on an individual basis.
Footasylum focuses on the footwear and apparel markets, targeting a younger trend-led consumer.
Barry Bown, executive chairman of Footasylum, said: “The Footasylum board has concluded that the offer represents the best strategic option for Footasylum and its employees.
“It believes the offer fairly reflects Footasylum’s current market position and prospects on a standalone basis and, as such, that Footasylum shareholders should be given the opportunity to realise value from the offer.”
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JD’s executive chairman Peter Cowgill said: “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.”
John Moore, Senior Investment Manager at Brewin Dolphin Scotland, said: “In many ways, JD Sports and Footasylum are complementary: there are cross-selling opportunities between them, while JD Sports’ brand positioning and relationships should mean that the relatively simple format both businesses offer trades even better than before.
“JD Sports is a long-term business – it will likely be patient and invest more than the previous Footasylum management team could, in order to realise the brand’s full potential.”
The offer will be subject to a shareholder vote, with the deal expected to complete in April or May.
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JD Sports said in statement to the London Stock Exchange: “The boards of directors of JD Sports and Footasylum are pleased to announce that they have reached agreement on the terms of a recommended cash offer for Footasylum by JD Sports, pursuant to which JD Sports will acquire the entire issued and to be issued ordinary share capital of Footasylum, other than the Footasylum Shares which JD Sports already owns.
“The offer values the entire issued and to be issued ordinary share capital of Footasylum at up to approximately £90.1m.”
JD Sports, which also has a controlling stake in Edinburgh-based outdoors sports clothing and camping firm Tiso, picked up a stake in its high street rival in February, acquiring a stake of 8.3% in the firm, which was later raised to more than 18%.
Pentland, the majority shareholder of JD Sports, also has a 2.6% holding in Footasylum.
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