DTLR transferred into US ‘Genesis Topco’ as intended at acquisition JD Group has acquired 98.6% of DTLR in the US for $504.4m ($495m pre stock adjustments) with the remaining 1.4% held by management in February 2021. As intended at the time of the acquisition, the Group has now transferred DTLR to Genesis Topco Inc, which holds JD’s other US businesses (Finish Line, JD Sports and Shoe Palace). Genesis Topco is 80% owned by the Group and 20% owned by the Mersho Brothers, who sold Shoe Palace to JD and still run it. The price Genesis is paying for DTLR is the same US$504.4m that JD Sports Fashion Group originally paid. In order to maintain its 20% holding in Genesis, the Mersho Brothers are investing their pro rata element of the equity consideration into Genesis, which is payable to the Group as part of the transfer. No impact on Group P&L We already assumed that DTLR would be transferred in Genesis with a 20% minority so there is no impact on our P&L forecast. From a Group cashflow perspective, given the financing of the DTLR deal was via the US debt facility and cash, the Group will receive c.$52m of cash back, which we had not assumed in our Group cashflow forecast. Reiterate BUY Last week’s AGM trading update confirmed that JD Sports was trading ahead of expectations, with in-store trade recovering post reopening in the UK and Europe and the US benefiting from the Government fiscal stimulus in March. We expect JD to resume its exciting growth story with a step change in earnings helped by past investments, recent and future acquisitions. Current valuation (CY22E PE 22x) does not reflect JD’s strong cash generation or its material growth opportunity, with risk to forecasts still weighted to the upside, in our view, assuming no further lockdowns. Next scheduled news: 1H21 results on 14th September.