JD Sports Fashion is in talks about a £400m share sale as it eyes further opportunities to expand in a global retail industry rocked by seismic change wrought by the coronavirus pandemic.
Sky News has learnt that the board of Manchester-based JD Sports is considering launching an equity placing as soon as this week.
Its size has yet to be determined but would be in the region of £400m, according to one insider.
If it gets the green light, the funds would be used to bolster a takeover war chest depleted by last month’s $681m (£491m) acquisition of Shoe Palace, a retailer based on the US west coast.
Roughly half of that sum was paid by JD Sports in cash, with the remainder handed to Shoe Palace’s shareholders as an equity stake in the FTSE-100 company’s US subsidiary.
City sources cautioned on Monday night that the capital-raising was by no means certain to proceed, and that JD Sports’ directors retained the option of calling a halt to their deliberations.
Confirmation of the plan, however, would come within days of two significant deals in the UK retail sector in which JD Sports considered participating.
The company, run by executive chairman Peter Cowgill, pulled out of a deal to buy Debenhams last month, a move that would probably have saved some of the department store chain’s 118 outlets.
Instead, Debenhams’ brand and website were sold on Monday to Boohoo Group, the online fashion retailer, potentially spelling the end of its centuries-long presence on UK high streets.
JD Sports also held talks with Authentic Brands Group, the US-based retailer, about a takeover of TopShop that would have involved the British company operating the jewel in Sir Philip Green’s former retail empire.
On Monday, Asos, the online clothing platform, confirmed a Sky News report that it was the frontrunner to buy TopShop from administrators to Arcadia Group.
Although Asos is in exclusive talks about that deal, analysts expect ABG and JD Sports to make a fresh approach if a transaction cannot be concluded.
Nevertheless, there is unlikely to be a shortage of plausible acquisition targets for Mr Cowgill given JD Sports’ growing international reach.
The company is also likely to enjoy strong backing from its shareholders if it proceeds with an equity-raise.
JD Sports has seen its shares trade broadly flat over the last year, a stark contrast with those of most non-food retailers, many of which have been plunged into crisis by the enforced closure of their stores.
The company has a market value of just over £8bn, making it the London stock market’s biggest athleisure retailer.
Frasers Group, which owns the Sports Direct chain as well as House of Fraser, has a market value of just £2.26bn.
Earlier this month, JD Sports hiked its full-year profit forecast, saying earnings would exceed £400m, compared with previous market expectations of just under £300m.
Investec and Peel Hunt, JD Sports’ brokers, are understood to be working on the prospective cash call.
A JD Sports Fashion spokesman declined to comment on Monday.