“King of trainers” JD Sports has sold its Footasylum chain to a German investment firm following a protracted battle with the UK competition watchdog.

JD is taking a hefty loss on the deal in which Munich-headquartered Aurelius will pay £37.5 million for Footasylum, compared to the £90.1m that JD paid to buy it off the stock market in 2019. The deal draws an end to a saga that has included two competition investigations, extensive legal wrangling, and regulatory fines which contributed to departure of JD’s long-time executive chairman Peter Cowgill.

According to Aurelius, Footasylum is expected to generate revenues of some £287m this year, with “attractive” profit margins. The company has 63 stores throughout the UK, plus seven websites and various warehouse facilities.

Aurelius said it will work with the Footasylum management team to enhance digitalisation while also continuing to build on its high street presence.

“As a standalone business, Footasylum has the potential to become an innovative retailer of sportswear and we are eager to unlock the company’s full potential,” Aurelius founding partner Dirk Markus said. “We believe that Aurelius is ideally placed to support Footasylum’s transformation, which will be backed by our extensive operational expertise within the retail, digital and wholesale channels.”

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The transaction is expected to close by the end of this month and comes after the Competition and Markets Authority (CMA) retrospectively blocked JD’s acquisition of Rochdale-headquartered Footasylum.

JD – the UK’s largest sportwear retailer with 3,400 stores across the Britain, North America other markets – originally announced the acquisition in March 2019 and closed the deal the following month. However, the CMA concluded in September of that year that the addition of Footasylum to the JD Sports empire would hurt competition in the sportswear market, and referred the deal for an in-depth investigation.

That probe concluded in February 2020 with an order to divest the business, but JD successfully overturned this by arguing that the CMA had acted “irrationally” by failing to consider the effect of the Covid pandemic on the marketplace. However, the CMA came back with a second investigation which in September 2021 reached broadly the same conclusions that competition on price, quality and service levels would reduce if the takeover went ahead.

During the investigations and subsequent sales process, Footasylum was to have been run at arm’s length from JD Sports. But in the summer of 2021, Mr Cowgill and his counterpart at Footasylum, Barry Brown, were filmed secretly meeting in a car park where they were said to be sharing commercially sensitive information. JD was fined £4.3m as a result.

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That was one of several factors which in May of this year led to Mr Cowgill’s departure after 18 years at the helm of JD, where he held the roles of both chairman and chief executive. He has been replaced by interim chief executive Kath Smith, with an announcement on a permanent replacement expected soon.

JD struck a more conciliatory tone yesterday, saying it had “cooperated with the CMA throughout the divestment process”, including ensuring that the new buyer was acceptable in the eyes of the competition watchdog.

“I would like to sincerely thank the teams at Aurelius and Footasylum who worked collaboratively with the CMA to agree this transaction,” Ms Smith said. “We wish both parties every success for the future.”

Analysts at UBS said the resolution to the stand-off should be taken positively, but added that JD is still facing several other regulatory probes. In June, the CMA provisionally found that JD, sporting goods firm Elite Sports and Rangers Football Club had conspired to fix prices of the Glasgow club’s clothing merchandise.