JD Sports enters into exclusive negotiations with Debenhams

JD Sports is reported to have entered into exclusive negotiations with Debenhams over the acquisition of the entire department store chain.

The sports retail giant, whose empire also includes Size?, Go Outdoors, Footpatrol and Giulio, opened talks with Debenhams' advisers Lazard and administrators at FRP Advisory earlier today, according to The Times.

JD's interest in acquiring the struggling chain was first revealed earlier this month when it was named as a "serious contender" to land Debenhams, which operates 124 stores nationwide along with an online business.

It is thought that the online business, which is one of the most popular shopping sites in the UK, and the opportunity to pick up some prime, low-cost real estate had attracted JD's chairman Peter Cowgill. It is not thought that JD is interested in putting its brands into Debenhams stores.

A deal is by no means assured but if it did come, it would be a major relief to Debenhams' 12,000 employees and suppliers. It was reported earlier that Lazard had been looking to secure £300m for the business, a price that put off fellow sports retail giant, Mike Ashley of Sports Direct parent Frasers Group.

Ashley had been circling Debenhams having failed to wrest control of it at the start of last year but complained that insufficient information was provided to enable his group to make a bid of the scale demanded by Lazard.

While it was a listed company, Ashley had built up a near-30% stake in the chain, which was wiped out when investors, led by SilverPoint Capital, took the chain into administration and bought it out immediately in a pre-pack deal last Spring.

Debenhams was once again placed into administration at the start of Lockdown 1 in a bid to protect the business while a buyer was sought. Most of its stores were re-opened after the lockdown and the chain had secured reduced rents on many.

A number of prospective buyers were circling the business with The Hut Group having expressed an interest in taking over the online arm and Marks & Spencer and Next interested in taking over some of its sites. Next has already taken over a number of former Debenhams sites for its new beauty and home concept.

JD Sports was given a boost to its expansion plans earlier this month when the Competition Appeals Tribunal overturned a block on its acquisition of smaller rival Footasylum. 

The tribunal argued that the CMA had not acted rationally in blocking the deal, did not follow up on inquiries with suppliers and failed to properly assess the likely impact of the Covid-19 pandemic in its decision.

It also found that the CMA did not fully understand the increased ability of Nike and Adidas to sell products directly to customers, which affected the decision making. The case will now go back to the CMA for reconsideration following the judgement.