JD Sports has proposed to acquire a 100% stake in Hibbett for a price of $87.50 per share in cash, implying an equity value of $1.08bn and an enterprise value of $1.1bn.
With headquarters in Birmingham, Alabama, Hibbett owns 1,169 stores in 36 states across the US with its main retail facias being Hibbett and City Gear.
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JD Sports announced that the acquisition will help expand its business in North America, strengthen its Complementary Concepts division, and boost its brand partner relationships, while also increasing the size of its platform to support JD’s continued rollout in the US.
CEO of JD Sports Régis Schultz described Hibbett’s footprint as “highly complementary, adding a stronger presence in communities across the southeastern US,” where it currently has a limited presence.
Despite senior apparel analyst at GlobalData, Pippa Stephens believing the expansion could provide “significant potential” she warns JD Sports must not “overextend” itself, as major sportswear brands like adidas and Puma are underperforming in North America “due to economic and geopolitical uncertainty.”
In isolation, the acquisition at first glance looks sensible to Clive Black the head of consumer research at Shore Capital. However, he highlighted some investors may perceive the opportunity cost to be buybacks at a low rating and a concentration of focus on the several acquisitions that have come in recent history – noting that Courir could follow this year.
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By GlobalDataJD Sports said it expects to fund the deal and refinance Hibbett’s existing debt through its existing US cash resources of $300m and a $1,000m extension to its existing bank facilities.
The enlarged group would have combined revenues of about £4.7bn in North America, JD Sports said, adding that the region’s contribution to total sales would increase to about 40% from the current 32%.
Hibbett has built a reputation for personalised customer service and access to premier brands such as NIKE, Adidas, and Jordan across footwear, apparel, and accessories.
In the fiscal year ending February 3, 2024, Hibbett recorded net sales of $1.7m, EBITDA of $186m, and profit before tax of $131.6m, with gross assets amounting to $909.2m.
JD Sports expects the transaction to be accretive in the first full year of ownership, with anticipated annual cost synergies of at least $25m. The retailer aims to maintain a robust balance sheet position following the completion of the transaction, with pro-forma net leverage expected to be (0.2)x.
The management team at Hibbett, led by president and CEO Michael E. Longo and executive vice president of merchandising Jared S. Briskin, will continue to spearhead the business post-acquisition.
Financial advisors involved in the transaction include Baird, Rothschild & Co and Freshfields Bruckhaus Deringer LLP for JD Sports Fashion Plc and Solomon Partners Securities, LLC, and Bass, Berry & Sims PLC for Hibbett.
The deal is expected to be completed in the second half of 2024.
