JD Sports Fashion (LON: JD) has agreed to purchase Finish Line Inc. (FINL) at a $558 million valuation ($13.50/share). The price represents a 28% premium on share values at the March 23rd close ($10.55), the day prior to the deal’s announcement. The transaction, subject to shareholder approval, is not expected to close before June 1st.
Howie Long-Short: As noted back on October 3rd, FINL added a “poison pill” and “shareholder rights” plan to bring SPD to the negotiating table (2nd largest shareholder); so, the offer that’s been accepted by the FINL board is particularly noteworthy on several fronts. Should the deal close, it would give JD a significant U.S. presence. It would also wrestle control of the company from Sports Direct International (LON: SPD), a direct competitor with a 9.9% stake (and 32% indirect interest) in the U.S. retailer. The market seems to believe SPD is going to counter as FINL shares closed last week at $13.54, above the proposed per share purchase price.
Fan Marino: While FINL reported mixed Q4 results (overall sales +.7%, net income of $16 million+ following a loss year-ago period, same store sales -7.9%), one segment of the business that performed well was Finish Line’s Macy’s (M) business (+8.5% YoY). For those of you who haven’t been to a mall in the last 5 years (like me), in September 2012 FINL became M’s exclusive partner for athletic footwear; introducing FINL branded footwear shops in 450 U.S. stores (and on macys.com). It’s interesting (if not coincidental) that when FINL signed the deal, the company projected it could boost annual sales by 30% ($350 million) on net income of $1.4 billion. The company reported FY17 sales of $1.844 billion.
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