JD Sports Fashion announced last week that it was no longer a candidate to the acquisition of JJB Sport. JD announced last Feb. 2 that it was in an early stage of discussions with JJB's board of directors in relation to a possible takeover offer. It subsequently asked for information to enable it to make alternative proposals for JJB's future, but it got nothing until a public document was circulated last March 3.
The document contained JJB's proposal for a corporate voluntary arrangement, or CVA, with the landlords that own its store as a way to get out of its financial problems. The CVA entails shutting down 43 stores by next April 24,with another 46 stores under review until a year after that. The retailer would pay landlords 50 percent of the contractual pro rata monthly rent ahead of closure and other sums. In addition, JJB would pay between £2.5 million (€2.9m-$4.0m) and £7.5 million (€8.7m-$12.1m) in cash or shares to landlords “compromised” by the CVA. The exact amount would be linked to the company's market performance. All of JJB's stores would also pay rent once a month rather than on a quarterly basis for the next two years.Mike McTighe, the chairman of JJB, said that the company was going to release details about the level of funding that would be necessary for restructuring and about its new business plan in advance of the meeting. The report would also include the key terms of a second capital increase, designed to deliver financing for the longer term.
In a separate statement following JD's renunciation, Tighe said that JJB welcomed this clarification by JD of its position, noting that JJB's board had considered an indicative proposal by JD to be “highly conditional and lacking sufficient certainty to be deliverable.” He expressed confidence that JJB will be able to achieve a successful turnaround with the support of its shareholders.
Creditors and shareholders are meeting on March 22 to vote on the CVA. The agreement would give JJB a chance to avoid administration, the British equivalent of Chapter 11 bankruptcy protection. JD's regulatory statement means that it commits itself not to make a bid for JJB for six months, with some exceptions. One would be a takeover offer by another party. Another would be a recommendation by JJB's board. Yet another exception would JJB's failure to obtain the necessary support for the CVA and other arrangements by the majority of its creditors.
