JJB aims to raise $49 million in share sale for short-term survival
LONDON: JJB Sports Plc, the unprofitable U.K. sporting-goods chain, plans to raise at least 31.5 million pounds ($48.7 million) in a share sale to help it survive after a sales recovery was halted by Britain's snowy weather, Bloomberg reported .
JJB rose 24 percent in London trading after the Wigan, England-based company said the new shares will be sold at 5 pence each, more than yesterday's closing share price of 4.3 pence. The plan has the support of JJB's main shareholders, while the company's lender, Bank of Scotland, has agreed to waive a January test of banking covenants.
JJB is seeking emergency funding after snow kept shoppers at home and a shortage of inventory at some stores caused sales to miss company forecasts. The money won't meet "medium-and longerterm working capital requirements," which the board will address after it finishes business plans, the company said. Chairman John Clare will step down and be replaced Mike McTighe, a former head of global operations at Cable & Wireless Plc.
"The scary thing is that even today's placing will only tide JJB over for a few months, and we suspect that the key shareholders supporting JJB are simply throwing good money after bad," said Nick Bubb, an analyst with Arden Partners who has no recom- mendation on the stock. Suppliers want to keep JJB in business to avoid Sports Direct International Plc dominating the U.K. market, Bubb wrote in a note to investors.
Clare, a former head of U.K. consumer-electronics retailer Dixons Retail Plc, will leave immediately. JJB needs a chairman with restructuring skills to complement the retailing background of CEO Keith Jones, Clare said in today's statement.
The company also said Finance Director Lawrence Coppock will be replaced on Jan. 17 by Dave Williams, who is joining from discount stores operator TJ Hughes Ltd.
Harris Associates LP, JJB's biggest shareholder with 19 percent, will invest 11.9 million pounds in the fund raising. The retailer also expects investments of 4.5 million pounds from Crystal Amber Fund Ltd., 11.6 million pounds from Invesco Perpetual, 1.5 million pounds from the Bill & Melinda Gates Foundation Trust and 2 million pounds from GoldenPeaks Capital.
The combined shareholdings of the five investors could rise to 71.7 percent from 44.3 percent after the placing, according to Katharine Wynne and David Jeary, analysts at Investec Securities. They have a "sell" rating on the shares.
Board roles will be offered to some of the investors.
JJB shares rose 1.04 pence to 5.34 pence in London, par- ing the stock's decline this year to 79 percent.
Sales at stores open at least a year fell 15.7 percent from Nov. 8 to Dec. 19, JJB said today, while gross profit margins narrowed to 35.4 percent from 45.3 percent a year earlier.
Sports Direct said on Dec. 16 it expects to meet full-year earnings forecasts as it sold more cold-weather clothing.
Moreover, sports retailer JJB Sports plc (JJB.L) reported that John Clare would step down as Chairman and Mike McTighe would be named in his place. In addition, Dave Williams will be appointed as Chief Financial Officer in succession to Lawrence Coppock.
The board stated that it has made agreements in principle with each of Harris Associates and Crystal Amber, the company's two largest shareholders, with Invesco Perpetual, the major shareholder in Crystal Amber, and with Bill & Melinda Gates Foundation Trust and GoldenPeaks Capital to support a proposed capital raising of at least GBP 31.5 million by way of a firm placing and placing and open offer at 5 pence per new ordinary share.
In addition, the company has entered an agreement with its lender Bank of Scotland to waive the January 2011 covenant tests in the Company's GBP 25 million revolving facility on the basis of the proposed capital raising. -PB News