English sports chain JD Sports is making a play for the U.S. market with its decision to buy The Finish Line for $558 million.
The cash deal includes all of Finish Line’s issued and outstanding stock at $13.50 per share and is subject to approval by the company’s board. A special committee appointed by Finish Line’s board has formally recommended that the buyout be approved, according to chairman Bill Carmichael.
“With JD, Finish Line achieves immediate value for its shareholders and moves into a stronger position to compete as part of a global enterprise that leads in our industry,” he added.
Shares of Finish Line shot up 31.14 percent Monday to a yearly high of $13.84. The company’s stock peaked in 2014 at a price of $31.40 per share.
Nevertheless, Finish Line and JD said in a joint statement that the $13.50 purchase price represents a 28 percent premium for Finish Line shareholders, while noting the “excellent strategic fit” the merger creates.
Peter Cowgill, JD’s executive chairman, said the merger gives his company the ability to establish itself “in the world’s largest ath-leisure market.”
“It immediately offers a major presence in the US, a clear next step to further increase our global scale,” Cowgill added. “Finish Line has many similarities to JD with a strong bricks-and-mortar offering complemented by an advanced and well-invested digital platform. Our combined extensive knowledge of the retail market and our product and marketing relationships with global brand partners will benefit our customers, in turn supporting the continued future growth of JD.”
JD in a separate statement added that the acquisition “is fully aligned with the company’s well-established focus of acquiring businesses, which have relevance to the company’s core strength and the capability of enhancing profitability.”
Sam Sato, chief executive officer of Finish Line was less verbose in a statement, noting the company has “long admired” JD and it’s looking forward to “realizing the impact we will have on the marketplace together.”
Susan Anderson of B. Riley FBR said the acquisition will give JD a “strong foothold” in the U.S., but is also likely to “improve both companies’ negotiating terms with major suppliers” and put Finish Line in a better position to compete with Foot Locker. Operating a U.S. company is also thought to give both brands a better chance at exclusive launches from Nike.
Anderson also noted that JD rival Sports Direct, operated by controversial English billionaire Mike Ashley, still holds its 9.9 percent stake in Finish Line, making it the biggest outside shareholder. Neither Finish Line or JD mentioned a shareholder voting agreement in revealing the deal.
JD has made a number of acquisitions over the years, most recently Sports Zone in Europe, which gave it a bigger position in Iberia.
JD will now have its pick from Finish Line’s more than 900 retail stores and brand locations in the U.S., as well as its e-commerce reach. However, the American chain has been closing scores of stores since at least 2016. A wave of 150 closings was announced that year, while another 20 were scheduled to close as of mid 2017.
“The combined purchasing power of Finish Line and JD, coupled with the strategic alignment with major international sportswear brands in North America, is expected, on completion, to enable the enlarged group to bring a highly differentiated multichannel retail proposition to the U.S. market,” the companies said.
Neither company mentioned further stores closings or whether JD’s brand would take over any of Finish Line stores here. Principle executives are expected to stay on.
JD operates more than 1,200 stores throughout Europe, selling major brands like Adidas, Nike and Vans, among many others, including two dozen of its own brands. Revenue for 2017 came in at $3.17 billion. It’s majority owned by Pentland Group, a brand management firm with stakes in brands Lacoste, Speedo and Ted Baker footwear.
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