JD Sports Fashion bought itself a vote on Tuesday in the future of JJB Sports, joining Mike Ashley’s Sports Direct on the Wigan-based company’s shareholder register.
JJB is looking to sell assets and is in early talks with Dave Whelan, its founder, about a possible sale of the health club arm.
Separately, JD is considering buying two small fashion chains from JJB.
But with JJB’s future in doubt, JD announced on Tuesday that it had purchased 10.02 per cent of its fellow retailer, paying £8.1m at 32.25p a share.
According to people familiar with the transaction, the stake was acquired from Sports Direct, leaving that company with about 11 per cent of JJB.
The complicated cross-shareholdings in the sportswear sector reflect hopes and fears for consolidation.
Sports Direct, the biggest chain, which is controlled by Mr Ashley, holds large stakes in JJB, JD and Blacks Leisure.
JD’s move on JJB is designed to give it a “seat at the table” along with Mr Ashley should the company be put up for sale, according to one industry executive.
JD, which concentrates on the upper end of the sportswear market, said it had bought the stake as a strategic investment “because of [JJB’s] important place in the performance sports retail market”.
Sports Direct subscribed for 5 per cent of JJB last month, paying 28.5p a share for new shares and adding to a 16 per cent interest built through contracts for difference, which was acquired at an average 29.5p a share.
With a stretched balance sheet and a £20m bridging loan from Kaupthing due to be paid by the end of the year, JJB has had to consider offers for various assets.
JJB made an operating loss of £8.4m in the half-year to July, and did not pay an interim dividend.
It said last month that its bankers, HBOS and Barclays, remained supportive, although in September it had a dispute with HBOS over its banking covenants.
However, Mr Ashley’s purchase of new shares bought JJB some breathing room, and a sale of its 50 health clubs for a mooted £100m would potentially cancel the company’s debt burden altogether.
JJB is also in talks with JD to sell its two small fashion chains – Qube and Original Shoe – to JD Sports. JJB bought Original Shoe from Sports Direct last year.
Adding to the web of ties between the three biggest sports retailers, Chris Ronnie, chief executive of JJB, is a former employee of Mr Ashley and of Pentland, the sportswear company that is JD’s biggest shareholder.