High street sports retailer JD Sports has initiated takeover talks with its rival JJB Sports, both the companies confirmed.
JD Sports said that it is in “early stage discussions” with JJB board for a possible acquisition. If approved, the merger will create one of the largest high-street chains in the UK.
JJB Sports is in financial trouble over falling sales and the Wigan based retailer announced a fresh round of funding from investors for £31.5 million. The announcement came three weeks after it issued warnings that the company may breach key loan covenants.
Severe snow had “significantly affected” sales, the company said – referring to the pre-Christmas period. Sales in the six weeks to December 19 were down by 15.7 percent, it said in a statement.
However, JD Sports – on the contrary has done better recently and said its sales grew during the Christmas trading period. It operates 350 JD Sports and Size outlets and like-for-like sales were up by 2.5 percent in the five weeks to January 1, 2011.
JD Sports diversified in to the French market last year when it bought the local retailer Chausport. The company has been planning to expand its fashion business Bank, which is currently centered around the Midlands and northern England.
“There can be no certainty that an offer will be made by JD Sports Fashion for JJB Sports, nor as to the terms on which any offer might be made”, JD Sports disclosed.
In a separate statement, JJB Sports said: “The highly preliminary nature of these discussions is such that there can be no certainty that any offer will be made or as to the terms of any offer”.