JD Sports Fashion Plc has sealed a conditional agreement to snap up retailer DTLR Villa LLC for $495 million, in a move to strengthen the UK sportswear retailer’s footprint in the US. Shares advanced almost 7% in midday UK trading.
JD Sports (JD) said that out of the total cash consideration for the acquisition, about $100 million will be used to repay existing company debt. The deal will be funded from the company’s cash resources and existing bank facilities. JD Sports and DTLR expect to complete the acquisition during Q1 2021, pending customary closing conditions and regulatory approvals.
The DTLR management team, headed by Glenn Gaynor and Scott Collins, who will remain in their roles as Co-CEOs, will also be reinvesting a portion of their proceeds back into DTLR in exchange for a new minority stake of about 1.4%.
Based in Baltimore and established in 1982, DLTR is an athletic footwear and apparel streetwear retailer. The retailer operates from 247 stores across 19 states, located mainly in the north and east of the US.
The DLTR deal comes after JD Sports’ acquisition of West Coast retailer Shoe Palace for $681 million last year and the takeover of Finish Line in 2018 for over $400 million.
“This is another exciting milestone in the Group’s development in the United States. Like Shoe Palace, DTLR pride themselves on the deep connection they have with their consumers and the active role they play in the communities that they serve,” said JD Sports Executive Chairman Peter Cowgill. “The acquisition of DTLR will enhance our presence in the north and east of the United States and will be another important step in the Group’s evolution.”
In the 52 weeks ended Feb. 1, 2020, DTLR generated EBITDA of $45.6 million. The retailer posted a pre-tax profit of $1.6 million after incurring a depreciation and amortisation charge of $24.7 million and recognizing net funding costs of $19.3 million. Gross assets on DTLR’s balance sheet amounted to $293.7 million, as of Feb. 1, 2020.
Shares of JD Sports have gained almost 16% over the past three months and are down about 4% over the past year. (See JD Sports stock analysis on TipRanks)
The Street has a Moderate Buy consensus rating on the stock based on 2 Buys and 2 Holds. The average analyst price target of 920p implies potential upside of another 15% over the next 12 months.