// Sports Direct says the CMA’s probe on JD Sports takeover of Footaslym could have implications for major brands
// Brands in question include Nike, Adidas, Puma and Under Armour
// CMA said it would escalate its probe to Phase II unless JD Sports provides a solution to address concerns
Sports Direct has said that a competition regulator’s investigation into JD Sports’ £90 million takeover of Footasylum could have implications for the sector’s major brands.
The Mike Ashley-owned firm, whose sportswear chain is JD Sports’ biggest rival, particularly highlighted the impacts the probe could have on its relationships with these brands, such as Nike, Adidas, Puma and Under Armour.
The news comes a day after the CMA expressed concern about JD Sports’ takeover deal of smaller rival Footasylum, warning it could lead to “higher prices” and “worse choice” for customers.
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The CMA said it would escalate its probe into the takeover, which it launched in July, to an in-depth, Phase II investigation unless JD Sports provided a solution to address the concerns.
Sports Direct reportedly received legal advice that the issues identified by the CMA regarding brand relationships could become a key focus of any Phase II investigation.
It said the issues would have implications on the sportswear sector “as they appear to highlight the power of the ‘must-have’ brands and potential market-wide practices aimed at controlling the supply and, ultimately, the pricing of their products”.
Sports Direct added it would continue to work constructively with all of its third-party brands.
JD Sports is the UK’s largest sportswear retailer after recently overtaking Sports Direct.
JD Sports’ eponymous parent company, which recently entered the FTSE 100 for the first time, operates more than 400 stores and also owns other retail brands such as Size?, Tessutti, Go Outdoors and Blacks.
Footasylum, which first opened in 2006, has 70 stores in the UK and generated revenues close to £200 million in 2018.
JD Sports yesterday defended its takeover deal, stating it believes there will be “significant operational and strategic benefits”.
It first its acquisition of Footasylum in March and the deal was greenlit by shareholders by the next month.
JD Sports had already owned a stake in Footasylum, having bought 19 per cent of its issued share capital in February.
At the time, the retailer told investors that it would not purchase Footasylum outright.
Nonetheless, a £90 million deal for the remaining Footasylum shares was made and the acquisition subsequently became unconditional on April 12.
By May, JD Sports had snapped up almost all of the shares in Footasylum.