Shares in the ‘king of trainers’ JD Sports Fashion (JD.) climbed 6.9% to 798p after the sportwear retailer said it had provisionally agreed the takeover of yet another US footwear and apparel retailer in its drive to expand in North America.
The latest deal will see the UK firm acquire Maryland-based DTLR Villa Inc for $495 million in cash to bolster its presence in the north and east of the United States, complementing its Finish Line and JD own-fascia store network.
DTLR - formerly known as Downtown Locker Room - currently operates 247 stores across 19 states, and in the year to 1 February 2020 delivered earnings before interest, taxes, depreciation and amortization (EBITDA) of $45.6 million.
The firm’s co-chief executives Glenn Gaynor and Scott Collins will retain their current roles and will keep some ‘skin in the game’ by re-investing some of the proceeds of the sale in a joint minority stake.
Of the total consideration, $100 million will be used to repay DTLR’s existing debt and will be funded from the group’s own cash resources and bank facilities.
JD Sports chief executive Peter Cowgill called the deal ‘another exciting milestone and another important step in the company’s evolution’.
Shore Capital analyst Greg Lawless called the deal a ‘sensible bolt-on’, noting that ‘JD is starting to scale in the US and with its best in class retail systems, long standing relationships with the brands and tight cost and stock control, the US division is starting to come of age in the largest sportswear market in the world’.
