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The UK’s biggest sportswear retailer, JD Sports Fashion, has agreed to acquire American athletic fashion retailer Hibbett Inc. for approximately $1.08 billion (£899 million).
This major acquisition is a part of the company’s strategic move to speed up its US expansion.
In a statement on Tuesday, JD Sports said it expected to fund the acquisition and refinance Hibbett’s existing debt ”through a combination of existing US cash resources” of $300m (£243.1m) and a $1bn (£810m) extension to its American banking facility.
As reported by Reuters, the company will pay $87.50 per Hibbett share in cash, representing a premium of about 20% to the US firm’s last closing price.
A Significant Foothold Across The US
Dominic Platt, JD’s Finance Chief, told Reuters that acquiring Hibbett, which has over 1,100 stores in 36 states, strengthens JD’s presence from coast to coast.
This strategic move builds upon JD’s existing footprint in the US market, including Shoe Palace, which has a strong presence on the West Coast, and DTLR, which has also been established in the East. The combined entity creates a powerful national athleticwear retailer.
Consequently, Hibbett’s shares were up 18% to $85.70 in premarket US trading. JD Sports shares, which have fallen more than 20% this year, were up 6% by 0900 GMT on Tuesday.
JD Sports also said that the enlarged group would have combined revenues of about 4.7 billion pounds in North America, adding that the region’s contribution to total sales would increase to about 40% from the current 32%.
Moreover, the deal is expected to add to the British firm’s earnings in the first full year of ownership, with cost savings expected to be at least $25 million, JD said.
In the previous month, the company reported that a decline in sales was partly attributed to the absence of new products from Nike, a significant supplier. Concurrently, Nike, a major supplier for JD Sports, revealed several cost-saving initiatives in December, such as workforce reductions and streamlining its product offerings.
In a statement, JD Sports Chief Executive Officer Régis Schultz expressed that the acquisition will enhance the company’s modest footprint in the southeastern United States. He also noted that the North American segment’s contribution to overall sales will increase from 32% to 40%.
Overall, this acquisition is expected to boost JD’s substantial presence in the US market as the company plans to be a dominant force in sporting goods retail.
