By Elena Vardon
JD Sports Fashion is buying Hibbett in a deal that values the American retailer at $1.08 billion, doubling down on its push into the U.S. at a challenging time for the sports-retail market.
The U.K. company said its acquisition of Birmingham, Ala.-based Hibbett accelerates its growth plans in the U.S., where it has been seeking to expand as rivals retreat.
The deal for Nasdaq-listed Hibbett builds on JD Sports' recent acquisitions in the world's largest sportswear market. It entered the U.S. in 2018 through its purchase of Indianapolis-based Finish Line and continued to bulk up by buying California sneaker chain Shoe Palace and Baltimore-based lifestyle retailer DTLR.
With the Hibbett deal, JD Sports steps up its bet on the U.S. at a time retailers are contending with subdued demand and intense promotional activity. Sneaker giant Nike last month gave a lackluster revenue outlook after it reported flat sales for its latest quarter.
Once the deal is completed, the combined revenue of JD Sports and Hibbett in North America would amount to around 4.7 billion pounds ($5.80 billion) and make up about 40% of the group's sales, up from 32% now, JD said. This would still leave it far behind retailers such as Dick's Sporting Goods and Foot Locker, which reported sales of $12.37 billion and $8.17 billion, respectively, for their most recent fiscal years.
Chief Executive Regis Schultz said the deal strengthens the company's footprint in the southeastern U.S., where it currently has a limited presence. Hibbett--which also operates the City Gear brand--has 1,169 stores in 36 states across the U.S., while JD Sports had 969 stores in North America at the end of July.
Shares in the London-listed group rose around 7% in morning exchanges and traded at around 126.5 pence in European morning trade. The stock is down 24% over the last 12 months.
JD Sports currently only has a U.S. market share in the low single percentage digits, so the deal materially bolsters its presence, RBC Capital Markets analysts Richard Chamberlain and Manjari Dhar wrote in a note to clients. On the downside, it could raise concerns that JD Sports is substituting organic growth with acquisitions and makes the company even more wedded to Nike, the analysts added.
The company on Tuesday said that it entered into binding agreement to acquire Hibbett, under which it is offering $87.5 a share in cash. The deal implies an equity value for Hibbett of $1.08 billion and an enterprise value of $1.11 billion, JD said. It also represents a sharp premium to Hibbett's closing price of $72.49 on Monday.
JD Sports is funding the deal and refinancing Hibbett's debt with $300 million of its existing U.S. cash resources and via a $1.0 billion extension to its existing bank facilities, it said.
Hibbett reported net sales of $1.73 billion for the year ended Feb. 3 and a pretax profit of $131.6 million.
The transaction is expected to complete in the second half, subject to approvals and clearances.
Write to Elena Vardon at elena.vardon@wsj.com
(END) Dow Jones Newswires
April 23, 2024 05:07 ET (09:07 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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