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JD Sports' $588-Million Finish Line Purchase Is Positive For Both Companies

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JD Sports' $588-Million Finish Line Purchase Is Positive For Both Companies

After several months of speculation, Finish Line Inc (NASDAQ: FINL) announced it has been acquired by a U.K. retailer, but not the one that was previously named.

JD Sports, known as one of the premier footwear retailers in the U.K., has purchased the Indianapolis-based footwear retailer for $588 million, or $13.50 per share.

With over 1,300 stores across the U.K. and Europe, the move instantly makes JD Sports a leading player in the American sneaker business.

Where It Falls

Finish Line is among the country's largest retailers in the space, along with Amazon.com, Inc. (NASDAQ: AMZN), Foot Locker, Inc. (NYSE: FL), Dicks Sporting Goods Inc (NYSE: DKS) and Walmart Inc (NYSE: WMT), said Matt Powell, a sports industry analyst at The NPD Group.

The acquisition is subject to approval by Finish Line and JD shareholders, regulatory approval and other closing conditions, Finish Line said in its Monday announcement. The deal is expected to close "no earlier than June," according to the retailer.

“Finish Line has long admired JD and their commitment to serve customers with premium brands through a unique and innovative retail experience,” CEO Sam Sato said in a statement.

Many similarities exist between Finish Line and JD Sports, such as a "strong" brick-and-mortar presence operating alongside an "advanced and well-invested digital platform," Peter Cowgill, the British retailer's executive chairman, said in a statement.

"We are looking forward to working with Finish Line’s experienced management team to bring best-in-class retail theater to the U.S. Our combined extensive knowledge of the retail market and our product and marketing relationships with global brand partners will benefit our customers, in turn supporting the continued future growth of JD."

Analyst: Finish Line 'Less Exposed' After Buyout

"Finish Line couldn't compete with Foot Locker, which had a lot more square footage," B Riley FBR analyst Susan Anderson told TheStreet. "This deal is going to be negative for Foot Locker because Finish Line will be a stronger competitor."

Finish Line released preliminary fourth-quarter results Monday that showed comps down nearly 8 percent.

NPD Group's Powell told Benzinga it's too soon know how the deal will affect Finish Line, but said it's positive for both parties despite a challenging industry environment.

"Finish Line now will be inside a large company, so they will be less exposed as they make changes," Powell said. "As an example, the renovated stores they have done have been quite successful, but not inexpensive to do, which makes it difficult when you are trying to meet Wall Street expectations on a quarterly basis."

For JD, the acquisition creates "a nice foothold" in the U.S. market and makes the company an international, scaled retailer, Powell said.

Related Links:

A Post-Sneaker World: How 'Small' Footwear Brands Are Beating The Giants

In Sports Retail, Expect A Challenging Year

Photo courtesy of Finish Line. 

Latest Ratings for FINL

DateFirmActionFromTo
Jun 2018TerminatesNeutralNeutral
Jun 2018TerminatesMarket PerformMarket Perform
Mar 2018UpgradesSellNeutral

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Posted-In: B Riley FBR JD SportsAnalyst Color M&A News Top Stories Exclusives Analyst Ratings Best of Benzinga

 

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