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The Overlooked Aspect of JD Sports’ $558 Million Acquisition of Finish Line $FINL | Business

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JD Sports Fashion Plc agreed to buy U.S. sportswear retailer Finish Line Inc., seeking to snatch away a company in which Mike Ashley’s Sports Direct International Plc has built a stake. (Photographer: Luke MacGregor/Bloomberg)

Source: JD Sports in Deal to Acquire Finish Line for $558 Million

As every news outlet reports on the acquisition of Finish Line by JD Sports, Bloomberg delivers some information that could potentially hold up the completion of the transition, “It’s up to every shareholder to decide on whether or not to vote in favor of the transaction, which has been unanimously backed by The Finish Line’s board,” a JD Sports representative said by phone, declining to comment specifically on Ashley’s stake.”

 

Poison Pill Shows Finish Line Never Adjusted | IBJ.com

In August of last year I reported on Sports Direct as a major shareholder in Finish Line. At that time the board at Finish Line took the “poison pill” to hold off Sports Direct who at the time held 29.6% of Finish Line’s shares. The decision by the board members kept Sports Direct at bay. Today’s acquisition by JD places the two UK sports retailers in a precarious position as Sports Direct still holds 9.9% of derivative shares of Finish Line and an indirect 32% interest (Bloomberg- Thomas Buckley). As reported in the quote above all shareholders have to agree on the acquisition.

This appears to be a play by JD Sports to grab an important business away from a UK competitor by getting a foothold in the huge North American marketplace.

A Few Issues for the Acquisition

  1. Retail is in a tailspin due to the promotional market.
  2. Finish Line is closing stores and the typical process of acquisition means cuts. While the article states that the acquisition is across geographies and shouldn’t affect either region, I can see the relationship with Finish Line inside of Macy’s being axed.
  3. The big brands, Nike, adidas, Under Armour, are all focusing on building e-commerce and direct to consumer options. I’ve mentioned this before, but it’s worth mentioning again, Finish Line doesn’t have private label products and in the long run that could hurt them as both Nike and adidas begin limiting distribution.
  4. If Sports Direct controls 32% Interest could the deal be rescinded?

This is a very interesting time and the story will have to be updated as information comes in about how Sports Direct will respond to the vote. It’s not exactly clear if there is a majority rules situation.