Changing its attitude toward the more lifestyle-oriented British retailer, JD Sports Fashion is now offering to take over all of Footasylum's shares. It had previously described its acquisition last month of 18 percent in the company as a portfolio investment, reserving the right to make a full bid, with the consent of Footasylum's board, if a third party makes an offer or if the chain becomes the target of a reverse takeover or some other maneuver (See SGI Europe Vol. 30 N° 7+8 of Feb. 19). JD's management declined to say what has triggered its new position because the move has yet to be finally approved.

The final offer document is due to be published soon, after some regulatory issues are taken care of. On March 18, JD said that the boards of the two companies had reached agreement on the terms of JD's recommended cash offer for all the shares. Footasylum's executive chairman, Barry Bown, said his company's board has already concluded that the offer represents the best strategic option for Footasylum and its shareholders. Bown spent 30 years at JD before his resignation as its chief executive and as a director in 2014.

Apparently, JD's offer to Footasylum's shareholders is very generous. The proposed purchase price of 82.5 cents a share in cash represented a premium of more than 77 percent over the latest closing stock market price of Footasylum. It is 41.0 percent higher than the weighted price of the shares for the prior 12 months and 185 percent higher than the closing price prior to JD's first investment in the company.

The proposed bid gives the company a total value of £90.1 million (€103.6m-$117.6m), or just over half the initial valuation that it had obtained when it went public on Nov. 2, 2017. In its last full financial year, ended on Feb. 24, 2018, Footasylum generated adjusted Ebitda of £12.5 million (€14.4m-$16.3m) on revenues of £194.8 million (€224.2m-$254.6m). It warned investors recently that its results would fall below expectations, driving down the share price.

JD mentioned several factors to justify the high premium of its bid. It pointed out that the two companies will get significant operational and strategic benefits from a combination of their businesses and that Footasylum will be able to leverage JD's greater scale in sourcing, its international infrastructure and its other commercial operations.

Noting that Footasylum is a well-established business with a strong reputation for lifestyle fashion, targeting a slightly older consumer than JD, it said it is largely complementary. Its target consumers are fashion-conscious people aged 16 to 24. JD added that the enlarged group should be able to take advantage of business opportunities which are not readily available to either JD or Footasylum on a standalone basis. JD's management declined to comment.

The proposed takeover – one of many made in recent months by the big U.K.-based retail controlled by Pentland Group – is conditional on its acceptance by the holders of at least 90 percent of Footasylum's shares, but it is quite likely to go through. Pentland, which owns 57.47 percent of JD, has agreed to tender its small 2.6 percent stake in Footasylum, which would be added to JD's current stake of around 18 percent.

Directors of Footasylum have agreed to sell another chunk 63.0 percent of the company's shares. They include members the families and trusts of David Makin and John Wardle, who founded the JD Sports chain and then sold it to Pentland.

Both JD and Footasylum have their headquarters in the Greater Manchester area. JD said it intends to keep the management of the two companies separate, while consolidating some central functions at JD's site. A strategy review is expected to be completed in the first nine months after the acquisition is declared unconditional.