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JD Sports runs into regulatory wall over Footasylum deal

Last updated: 07:15 19 Sep 2019 EDT, First published: 03:09 19 Sep 2019 EDT

JD Sports Fashion PLC -

JD Sports Fashion PLC’s (LON:JD.) £90mln acquisition of sportswear chain Footasylum will be subject to a deeper probe by the competition watchdog.

The Competition and Markets Authority (CMA) said on Thursday that it intends to refer the deal to a Phase 2 investigation.

Peter Cowgill, JD’s executive chairman, said the company was in discussions with the CMA and it would “consider whether to proceed to Phase 2 or if acceptable remedies can be agreed at this stage”.

In July the CMA launched the first phase of its enquiry into the combination, which FTSE 100-listed JD had agreed in April.

Footasylum runs an estate of 69 shops, mostly selling trainers, while JD owns 434 UK shops focused on trainers and ‘athleisure’ wear, plus 154 UK fashion stores under multiple brands.

“We continue to believe that Footasylum would be a positive addition to the Group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business,” Cowgill said.

“We also believe that there will be significant operational and strategic benefits from a combination of the two businesses.”

Broker Shore Capital said it was another example of the CMA bearing its teeth and having an in-depth look at M&A in the retail sector, following the blocking of the proposed Sainsbury and Asda deal back in the spring.

“We are surprised to see a phase 2 referral for this deal. We would hope that there would be sufficient discussions to identify suitable remedies to offset the competition issues,” analysts said. 

JD shares, up more than 40% over the past 12 months, were down 2% on Thursday to just under 700p.

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