JD Sports has struck a deal to sell Footasylum to German asset management firm Aurelius Group for less than half the price it originally paid, after the UK competition watchdog finally forced it to divest. the chain of trainers.
The £38m deal is due to be completed in the coming weeks, ending a saga that began with the £90m purchase of rival JD Sports in 2019 as the FTSE 100 group looked to strengthen its position in the UK’s high street. United.
The deal had become a long financial drag on the company. JD Sports has also spent “a lot” on outside competition lawyers, likely costing millions of pounds, according to its annual report last month. The company had already made a £55.6m write-down in 2021 after realizing Footasylum was worth less than it had thought, and £7.4m in costs in 2020 directly related to the transaction.
The UK’s Competition and Markets Authority (CMA) had major concerns from the outset that the acquisition of Rochdale-based Footasylum, which has 63 UK stores, would reduce competition. However, JD Sports, which runs 3,400 stores in the UK, North America and other markets, notably challenged the regulator’s authority by successfully arguing in 2020 that the CMA had acted “unreasonably” in failing to consider the effect of the pandemic. of coronavirus in the market.
However, the CMA came back and, in September 2021, found again that competition on price, quality, range and service levels in footwear and apparel could still be reduced if the takeover went ahead.
JD Sports reacted furiously at every stage of the process. Its former chief executive, Peter Cowgill, argued that the deal would not lessen competition because more and more potential customers were looking online to buy sneakers directly from brands including Nike, Adidas and Puma, which supply and compete with JD Sports and Footasylum.
However, Cowgill resigned in May, 18 years after becoming CEO of the company, following a boardroom breakup related to the division of the roles of chairman and CEO, both of which he held.
His resignation came just months after JD and Footasylum were fined nearly £5m for sharing sensitive business information during the competition investigation. Cowgill and his Footasylum counterpart Barry Brown were filmed secretly meeting in a parking lot during the CMA investigation. The CMA also said the phone records were deleted.
JD Sports attempted to strike a more emollient tone on Monday, saying it had “cooperated with the CMA throughout the divestiture process,” including verifying that the new buyer was acceptable.
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Kath Smith, interim CEO of JD Sports, said: “I would like to sincerely thank the teams at Aurelius and Footasylum who worked collaboratively with the CMA to agree on this transaction. We wish both parties every success for the future.”
Dirk Markus, founding partner of Aurelius, said he would work with Footasylum to increase their online sales and develop “their own branded offerings”.
He said, “As an independent business, Footasylum has the potential to become an innovative sportswear retailer and we look forward to unlocking the full potential of the company.”
Source: www.theguardian.com