TIDMJD.
RNS Number : 7024Q
JD Sports Fashion Plc
14 September 2017
14 September 2017
JD Sports Fashion Plc
Conditional combination of JD's existing interests across Iberia
with Sport Zone in Portugal, Spain and Canary Islands, and proposed
associated related party transaction
JD Sports Fashion Plc ('JD' or the 'Company'), the leading
retailer of sports, fashion and outdoor brands, announces that,
further to its announcement of 9 March 2017, it exchanged
conditional contracts on 13 September 2017 to combine its existing
business in Iberia, JD Sprinter Holdings 2010 S.L. ('JDSH'), with
the Sport Zone business(1) ('Sport Zone') which is a subsidiary of
Sonae - SGPS, SA ('Sonae') (the 'Sport Zone Transaction') and one
of the largest sports retailers in Spain and Portugal. As part of
the transaction, JD will also purchase shares in JDSH from Balaiko
Firaja Invest SL ('Balaiko'), which is the investment vehicle for
the current minority family shareholder in JDSH (the 'Balaiko
Transaction') (together the 'Transactions').
With an estimated combined turnover in excess of EUR450m and a
store network of 311 stores (204 of which are in Spain (mainland
and Canary Islands) and 107 are in Portugal), JD, together with
Sport Zone, will, on completion, become the second largest Iberian
Sports Retailer and will generate further scale, momentum and
resources to continue the current growth of JD in Spain and
Portugal.
Information on Sport Zone
Sport Zone is a well-established and leading multi branded
sports retailer in Portugal, with a presence in Spain (mainland and
Canary Islands). With 140 stores in Iberia (94 in Portugal and 46
in Spain, of which 20 are in the Canary Islands) it offers a
multisport product range with a wide apparel, footwear, accessories
and equipment offering.
The aggregated reported revenue for the entities that include
the Sport Zone business for the financial year to 31 December 2016
was EUR226.7m, with store EBITDA of EUR37.2m, gross assets of
EUR150.1m and a loss before tax of EUR27.7m. These figures are
presented as an aggregation of the audited accounts for these
entities and will not be comparable to the ongoing business as they
have not been adjusted to discount for i) activities outside of the
scope of Sport Zone and therefore not part of the Transactions; ii)
certain Sonae Group charges which will not continue in the new
structure and iii) other intragroup transactions customary for a
group of this nature.
Sport Zone is currently wholly-owned by Sonae, a Portuguese
based multinational corporation that
manages a portfolio of businesses across a range of sectors.
Background to and reasons for the Transactions
Sonae is a large listed group in Portugal with significant
retail activity and an experienced and proficient management team
who are extremely knowledgeable about the Portuguese retail market
after having traded there for many years. The existing management
team of JDSH is led by the Segarra family (who are shareholders in
Balaiko) who have been instrumental in the success of the JD Spain
and Sprinter businesses over the past 5 years, building upon their
extensive knowledge of the Spanish retail market.
Upon completion, JDSH will be able to draw on the experience and
expertise from both management teams, to create an effective and
efficient retailer across Iberia. It is also expected that by
bringing together both businesses there is significant potential
for accelerating growth and streamlining the organisational
structure.
The management teams from both the Company and Sonae will play a
key role in the future strategic and operational management of the
combined business across Iberia.
The Balaiko Transaction will align the share ownership structure
of JDSH and allow the Company to maintain its majority interest in
JDSH following the Sport Zone Transaction, which, amongst other
things, will allow the Company to continue to consolidate the net
assets of JDSH into its accounts.
Following completion, JDSH will have as shareholders JD, Sonae
and Balaiko with shareholdings of approximately 50%, 30% and 20%,
respectively.
Terms of the Transactions
Consideration to Sonae for the Sport Zone Transaction comprises
a shareholding of approximately 30% in JDSH and cash of EUR7.1m.
Additionally, and inter-conditional on completion of the Sport Zone
Transaction, the Company will, subject to shareholder approval
inter alia, acquire a shareholding of approximately 2.35% in JDSH
from Balaiko, for EUR6.0 million. These initial cash payments will
be satisfied from existing free cash resources in JD.
There is also contingent consideration of up to EUR23.5m payable
to Sonae in the future by JDSH based upon, and matched by, future
value creation over and above our expectations.
Additionally, a number of put and call options, to enable future
exit opportunities for the Company, Sonae and Balaiko have been
conditionally entered into as part of the Sport Zone Transaction
and the Balaiko Transaction. The value of these put and call
options are subject to independent valuation at the time they are
exercised and to the extent the exercise of any of these put and
call options are not at the sole discretion of the Company, the
independent valuations have been capped. In each case, and in
aggregate across each of Sonae and Balaiko, consideration payable
will be capped at 24.99% of JD's gross capital (pursuant to section
7R of Annex 1 of Listing Rule 10), less any consideration already
paid under the Transactions. Within this aggregated limit, there is
also a specific limit for Balaiko of 24.99% of JD's gross
assets.
In accordance with European Union Law, the transaction will be
notified to the European Commission who may defer responsibility
for assessing the transaction to the national competition
authorities in Portugal and Spain respectively. Completion of the
acquisition is therefore conditional inter alia on JDSH and Sonae
being satisfied with the terms of the approval of the transaction
issued by the relevant Competition Authority. Completion is also
conditional on the satisfaction of other conditions(2) . Given the
potential timings associated with the competition assessment
process in particular, we would not expect the Sport Zone
transaction to have a significant impact on the Company's results
for the current year to 3 February 2018.
Related Party Transaction
Balaiko is an investment vehicle owned by the Segarra family who
founded the Sprinter group of companies which were acquired by JDSH
in 2011. As part of this acquisition, Balaiko became a minority
shareholder in JDSH and currently owns an effective shareholding of
approximately 33.3% in JDSH.
By virtue of Balaiko's current interest in the issued share
capital of JDSH and the potential aggregate consideration due to
it, the Balaiko Transaction constitutes a related party transaction
under Chapter 11 of the UK Listing Rules.
Consequently, the Balaiko Transaction is conditional upon, and
must be approved by, the Company's shareholders before it can be
completed. Accordingly, the approval of the Company's shareholders
will be sought at the General Meeting to be held on 5 October 2017.
An explanatory circular containing the Notice of the General
Meeting will be sent to shareholders today and the Company will
make a further announcement accordingly.
Irrevocable undertakings
The Company has received an irrevocable undertaking from
Pentland Group plc to vote in favour of the resolution to approve
the Balaiko Transaction (the "Resolution") in respect of their
entire holding in the Company, representing approximately 57.47% of
the Company's issued share capital.
Furthermore, all the Directors who hold ordinary shares of 0.25p
each in the capital of the Company ('Ordinary Shares') have
provided irrevocable undertakings to vote in favour of the
Resolution in respect of their respective holdings of, in
aggregate, 8,924,260 Ordinary Shares, representing approximately
0.91% of the Company's issued share capital.
Accordingly, the Company has, in aggregate, received irrevocable
undertakings to vote in favour of the Resolution in respect of
568,198,700 Ordinary Shares, representing approximately 58.38% of
the Company's issued share capital.
Peter Cowgill, Executive Chairman, commented:
"Sport Zone is very complementary to our existing businesses in
Iberia. We believe there are significant opportunities for
synergies to be created to improve operational efficiencies and
profitability through the combination of the very experienced and
knowledgeable management team at Sport Zone and our own expertise
as we continue to strengthen JD's presence in Europe."
Enquiries:
JD Sports Fashion Plc Tel: 0161 767 1000
Peter Cowgill, Executive Chairman
Brian Small, Chief Financial Officer
Neil Greenhalgh, Group Financial Controller
MHP Communications Tel: 0203 128 8100
Andrew Jaques
Barnaby Fry
Gina Bell
(1) comprising 100% of Sport Zone Portugal (Sports Division SR),
100% of Sport Zone Spain (Sport Zone España - Comercio de Articulos
de Deporte S.A.) and 60% of Sport Zone Canaries (Sport Zone
Canarias SL) (together 'Sport Zone').
(2) including the receipt of consent from certain landlords and
the consent of Sport Zone's lenders
Information on JDSH
JDSH was incorporated by the Company as an entity in 2011 to
acquire the trading businesses that make up the Sprinter group of
companies, one of the leading multi branded sports retailers in
Spain selling footwear, apparel, accessories and equipment for a
wide range of sports as well as lifestyle casual wear and
childrenswear. JDSH and its subsidiaries operate the Company's
business in Spain and Portugal.
The Company currently owns an effective shareholding of
approximately 66.7% in JDSH with the net assets of JDSH
consolidated in the Company's accounts. Balaiko currently holds the
balance of JDSH's issued share capital.
For the year ended January 2017, JDSH reported a profit before
tax of GBP11.8 million and gross assets of GBP103.5 million.
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulations (EU) No. 596/2014
("MAR") and is disclosed in accordance with the Company's
obligations under Article 17 of MAR.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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