A complementary hyperlocal chain located mainly in the north and east of the US JD Sports has announced the acquisition of 100% of DTLR Villa LLC, a Baltimore, Maryland based hyperlocal athletics and apparel streetwear retailer, which operates from 247 stores across 19 states. Stores are principally in the north and east of the US. The deal is subject to expiration or termination of the applicable waiting period under the HSR antitrust act with the deal anticipated to close during Q1 2021. The attractions of the business include its connection to the black urban community with 70% of locations on the street, which differs from Finish Line, which is mall-based. The stores are c.3,000 sq.ft in size with apparel c.20% of sales mix and the business has good brand relationships (Nike +Jordan c.60% of mix). The intention is to retain the DTLR fascia with current management running it. Total cash consideration $495m The total cash consideration is $495m, of which $100m is to be used to repay existing debt. The business is to be folded into the US ownership structure at a later date, rather than JD Sports plc directly owned as acquired, and so end up 80% owned directly by JD Sports plc with a 20% minority. In addition, the management of DTLR will reinvest a proportion of these proceeds back in and have a c.1.4% minority holding in DTLR. DTLR made EBITDA of $45.6m on sales of just under $500m in the 52 weeks to 1 February 2020. The store growth rate following consolidation is likely to be c.5%, according to management. An attractive, complementary business with attractive margins This is another attractive bolt-on acquisition in the US, which helps build scale in different locations to Finish Line. We continue to believe the valuation of JD Sports does not reflect the strength of its cash generation nor future growth prospects. Forecasts/TP are under review.