The UK competition regulator has said the takeover of sportswear chain Footasylum by rival JD Sports could result in higher prices, less choice and poorer service and demanded JD Sports address its concerns or face an in-depth probe of the deal.
JD Sports has 400 shops in UK town centres. It announced its £90m acquisition of Footasylum this year and the deal has already completed. Footasylum has about 70 shops and generated revenues of close to £200m in 2018.
The Competition and Markets Authority said on Thursday that merging the chains would remove one of JD Sports’ closest competitors, and warned that the takeover would be referred for a more in-depth “phase two” investigation if its concerns were not addressed.
“JD Sports is already by far the largest player in the growing sports fashion sector, so any deal that results in it buying up one of its closest competitors could clearly give cause for concern,” said Colin Raftery, senior director at the CMA.
“Our investigation has shown us that JD Sports and Footasylum have been competing strongly across the UK, with a sports fashion offering that few other retailers are able to match.”
The regulator first announced it was investigating the takeover in July after it had completed. If it decides on a phase two investigation, it will have 24 weeks to examine the deal and propose remedies.
JD and its major shareholder Pentland have not been able to make any significant changes to the Footasylum business since acquiring it in April. JD’s executive chairman Peter Cowgill said in a statement that discussions with the CMA were ongoing “as we consider whether to proceed to Phase 2 or if acceptable remedies can be agreed at this stage”.
Footasylum founder David Makin was one of the two co-founders of JD Sports. Fellow JD Sports co-founder John Wardle was appointed chief executive of Footasylum in 2008, remaining in that post until 2015 when he was succeeded by Clare Nesbitt, Mr Makin’s daughter.
UK consumers spent about £5bn on sports clothes and footwear in 2018, according to the regulator.
The CMA has intervened in a number of high-profile deals in recent months, including blocking the proposed merger of J Sainsbury and Asda in April on the grounds of “extensive concerns” about competition.
Additional reporting by Jonathan Eley
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