Tuesday 26 September 2017

Sports Direct shares drop as it unveils deal to acquire Heatons

Model Clare McDougald at the launch of Heatons 2015 autumn / winter collection. Inset, Sports Direct and Newcastle United owner Mike Ashley
Model Clare McDougald at the launch of Heatons 2015 autumn / winter collection. Inset, Sports Direct and Newcastle United owner Mike Ashley

Shares in UK firm Sports Direct dropped by almost 4pc yesterday after the company announced a €47.5m deal to take full ownership of Irish retailer Heatons.

The UK company, founded by billionaire Newcastle United owner Mike Ashley, currently owns 50pc of Heatons' holding company, Warrnambool. Sports Direct has entered into a deal with Heatons' minority shareholder, Sandra Minor, that would take its existing stake above the 50pc mark.

The sportswear giant has also entered into a separate conditional 'put-and-call' option with family founders Mark Heaton, Hugh Heaton and John O'Neill, to gain control of the company. The deal, which will see Sports Direct pay €47.5m, is conditional on the proposal receiving regulatory clearance. The options are are exercisable at various times after the deal gets clearance and before 2 July 2017. In the year to the end of April last year, the holding company had revenues of more than €219m, gross assets of €158m and profits before tax of €10m.

There had been speculation that Heatons chief executive John O'Neill had left the firm, with trade publication RetailWeek reporting that he had departed following a falling out between the partners. However, a spokesman for Heatons said he was still serving as CEO although he added that it "has not been decided what happens after [the deal is completed]".

Shares in Sports Direct were down by nearly 4pc to 745 pence in mid-afternoon trading in London yesterday, with some analysts disappointed that the firm had not closed a larger deal.

Jonathan Pritchard, an analyst with UK stockbroking firm Peel Hunt said: "This looks like a perfectly sensible deal. On a low double digit multiple there is limited risk here but this is not the game changer that Sports Direct has been promising us and with core forecast momentum still profoundly negative, the shares hold no appeal to us whatsoever."

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