JD Sports Fashion Plc Acquisition of Shoe Palace in United States (6250I)
December 15 2020 - 1:00AM
UK Regulatory
TIDMJD.
RNS Number : 6250I
JD Sports Fashion Plc
15 December 2020
15 December 2020
JD Sports Fashion Plc
Acquisition of Shoe Palace in United States
JD Sports Fashion Plc ('JD' or the 'Group'), one of the world's
leading retailers of sports, fashion and outdoor brands, announces
that on 14 December 2020, its existing wholly-owned intermediate
holding company in the United States, Genesis Holdings Inc
('Genesis'), acquired 100% of both the issued shares in the Shoe
Palace Corporation and the members' interests in Nice Kicks LLC
(together 'Shoe Palace').
Based in San Jose, California, Shoe Palace was established in
1993 by the Mersho family and currently has 167 stores, the vast
majority of which trade under the Shoe Palace banner. More than
half of the stores are located in California, although there is
also an established retail presence in Texas, Nevada, Arizona,
Florida, Colorado, New Mexico and Hawaii, with the store network
supported by a developing ecommerce platform. In the year to 31
December 2019, Shoe Palace generated revenues of $435 million. Shoe
Palace is operated by four brothers from the Mersho family
(together the 'Mersho Brothers') who head up the various operating
functions across the business.
Total cash consideration for the acquisition of Shoe Palace,
subject to customary cash / debt and working capital adjustments,
is $325 million, of which $100 million has been deferred and will
be paid on various dates over the next 12 months. This cash
consideration is being funded from the Group's cash resources and
existing bank facilities. In addition, the Mersho Brothers have
also been issued with equity in Genesis such that they will own 20%
of the enlarged group in the United States. The initial fair value
of this equity consideration is approximately $356 million.
Additionally, a number of put and call options, to enable future
exit opportunities for the Mersho Brothers have also been agreed,
which commence after the end of the financial year to 1 February
2025. [1]
The acquisition of Shoe Palace complements the Group's ongoing
positive developments from the existing Finish Line and JD fascias
in the United States, which includes the recent opening of JD's
flagship store in Times Square, New York. In particular, this
acquisition will significantly increase the Group's presence on the
West Coast of the United States and strengthen its connection with
the Hispanic and Latino consumers, who represent a significant
proportion of Shoe Palace's customer base.
The Mersho Brothers will continue to manage the Shoe Palace
business although the intention is that, from next year, the JD
Finish Line and Shoe Palace teams will begin to share ideas and
best practices as we look to create an unrivalled proposition which
connects with all relevant consumers.
In the year ended 31 December 2019, Shoe Palace delivered a
profit before tax of $52 million. The gross assets in the Shoe
Palace audited balance sheet at 31 December 2019 were $197
million.
Peter Cowgill, Executive Chairman of JD Sports Fashion Plc,
said:
"We are delighted to have completed the acquisition of Shoe
Palace. The Shoe Palace team are ambitious, have great energy and
pride themselves on their consumer connection and we welcome them
to the Group. We are confident that our combined fascias will
provide us with the flexibility and expertise to fulfil our mutual
ambition of becoming a prime customer destination for sneakers and
lifestyle apparel in the United States."
George Mersho, CEO of Shoe Palace added "We could not imagine a
better way to continue to build on the legacy of our family
business. Through this combination with JD and Finish Line in the
US, we have gained a strong global partner. We look forward to
being part of the JD family and continuing to serve our customers
and communities for many years to come."
Enquiries:
JD Sports Fashion Plc Tel: 0161 767 1000
Peter Cowgill, Executive Chairman
Neil Greenhalgh, Chief Financial Officer
Jennifer Iveson, Investor Relations
MHP Communications Tel: 0203 128 8788
Andrew Jaques
Giles Robinson
Charles Hirst
Catherine Chapman
[1] To the extent that the exercise of any of these put and call
options are not at the sole discretion of JD, the maximum
consideration payable has been capped below 24.99% of JD's market
value, less any consideration already paid.
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