Britain's JD Sports gets foot in US with $558 million Finish Line buy

  • JD Sports Fashion agreed to buy U.S. sportswear retailer Finish Line for $558 million in cash.
  • Growing demand for branded sports shoes and clothes has enabled JD Sports to overtake Sports Direct as Britain's leading sportswear retailer by market value.
  • The move increases JD Sports' importance to international brands, particularly Nike and Adidas.
A Finish Line store in Katy, Texas.
Finish Line Apparel
A Finish Line store in Katy, Texas.

Britain's JD Sports Fashion is entering the lucrative U.S. market after agreeing to buy Finish Line for $558 million in cash, the sportswear retailer said on Monday.

Growing demand for branded sports shoes and clothes has enabled JD Sports to overtake Sports Direct as Britain's leading sportswear retailer by market value.

Its move into the largest sportswear market is its boldest yet, increasing JD Sports' importance to international brands, particularly Nike and Adidas.

NASDAQ-listed Finish Line is one of the largest retailers of premium multi-branded athletic footwear, apparel and accessories in the U.S., trading from 556 branded retail stores across 44 states and Puerto Rico and online.

JD Sports has expanded overseas in recent years, gaining a presence in France, Spain, and South Korea.

"This is a landmark day for JD and will be transformational for the business. It immediately offers a major presence in the U.S., a clear next step to further increase our global scale," its Executive Chairman Peter Cowgill said.

Shares in JD Sports rose up to 3.9 percent in early trading.

"The deal looks a sensibly-priced entry point into a market that JD must embrace to be considered a genuinely global player," said Peel Hunt analyst Jonathan Pritchard, who has a "buy" rating on the stock.

Finish Line is also the exclusive retailer of athletic shoes, both in-store and online, for Macy's, operating 375 branded and 188 unbranded concessions within Macy's stores.

Its revenue in the year to March 3, 2018, was $1.84 billion.

Pritchard said the deal will enhance JD's relationships with the big manufacturers, especially Nike, which represents 71 percent of Finish Lines sales.

JD Sports has agreed to pay $13.50 per share for Finish Line, compared to its $10.55 close on Friday, which gave it a market capitalisation of $425 million versus JD Sports' 3.5 billion pound value.

The British firm is funding the deal through a new revolving credit facility and a new asset backed lending facility secured against Finish Line's inventory and receivables.

JD Sports forecast the acquisition would make a small incremental positive contribution to its results and earnings per share in the year to Feb. 2 2019.

The deal, which requires the approval of both companies' shareholders, is expected to complete no earlier than June.