JJB aims to raise $49 mil­lion in share sale for short-term sur­vival

The Pak Banker - - Company& -

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

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