JJB receives £20 million investment from Dick's Sporting Goods
Struggling sportswear retailer JJB Sports has confirmed that Dick's Sporting Goods, the US sporting goods retailer, has agreed to make a £20 million investment in the company.
Under the terms of the agreement, Dick's Sporting Goods will purchase £18.75 million in junior secured convertible notes and £1.25 million in ordinary shares of JJB Sports, subject to the approval of JJB's shareholders.
Dick's has also been granted the option to purchase an additional £20 million in junior secured convertible notes of JJB in connection with a follow-on financing expected to take place in the first quarter of 2013. Upon full conversion of the notes, Pittsburgh-based Dick's would become a controlling shareholder of JJB.
Although virtually unknown in the UK, Dick's Sporting Goods operates 480 stores in the US, plus 81 Golf Galaxy outlets. In 2011, Dick's sales reached $5.2 billion and the company made a post-tax profit of $182.1 million.
As part of the deal, Dick's will have the right to appoint up to two non-executive directors to JJB's board.
JJB's chief executive Keith Jones said the strategic alliance with Dick's would provide an opportunity to accelerate JJB's turnaround. He added: "We have always said that the turnaround of JJB was never going to be easy or quick, and the current retail environment has made our work even more difficult."
JJB also revealed that key supplier Adidas will provide security for a two-stage loan of up to £15 million to progress JJB's store transformation programme, which is being accelerated ahead of this year's UEFA Euro Championships and the London Olympics. In addition the Bank of Scotland has agreed to extend existing loan facilities until May 2015.
Edward Stack, chairman and chief executive officer of Dick's Sporting Goods, said: "We believe that JJB is a strong company with the potential to become a leading multi-channel sporting goods retailer both in Britain and throughout Europe.
"We look forward to providing the company with financial support at this crucial stage of its turnaround and to using our expertise in the US market to help guide its growth efforts."
The announcement comes as JJB reported that like-for-like sales for the year to 29 January fell 13.1%. Sales in the nine weeks to 1 April fell by 5.7%, while gross margin decreased by 24.9%.
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