Sports World gears up for £2bn flotation

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Sports World, the UK’s largest sports retailer, is gearing up for a planned £2bn flotation that could take place as soon as March.

The group, owned by billionaire entrepreneur Mike Ashley, will this week meet bankers from Merrill Lynch, Citigroup and Credit Suisse to thrash out a plan for its future.

Merrill was appointed in the autumn to review options for Sports World, which Mr Ashley wants to become the biggest sports chain in the world.

The three banks are gauging whether there is investor appetite for a £2bn-£2.5bn initial public offering of the group, which includes 370 stores and brands such as Dunlop Slazenger.

A decision is expected this week, with a go-ahead dependent on the banks’ confidence that they can meet the valuation in a market unsettled by last year’s controversial flotation of Debenhams.

The department store chain returned to the stock market last May, having been taken private by a trio of private equity groups led by Texas Pacific Group.

After floating at the bottom of their indicated range, the shares have continued to decline amid a faltering business performance.

One investment banker said: “I do think investors felt legged-over [in Debenhams]. It does make it harder.”

Sports World and its bankers will emphasise the differences between the group and Debenhams. Sports World has no debt and has grown without private equity, they say.

A valuation for Sports World of more than £2bn is thought by some analysts to be a stretch.

Sports World’s accounts to April 2005 show pre-tax profits of £74m on turnover of £905m. However, the chain has grown rapidly in the past two years and a flotation would catapult it above JJB Sports and John David Group, its listed rivals.

An IPO would raise questions over Mr Ashley’s 29 per cent stake in Blacks Leisure, the troubled outdoor wear retailer. While the IPO would allow him to fund a takeover bid, he is understood to believe that a move soon after a listing would be unwise.

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