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07 Jul 2023
JD Sports Fashion : Acquiring 100% of ISRG - Buy

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JD Sports Fashion : Acquiring 100% of ISRG - Buy
JD Sports Fashion Plc (JD:LON) | 80.6 0 (-0.1%) | Mkt Cap: 4,137m
- Published:
07 Jul 2023 -
Author:
Ben Hunt, CFA | Kate Calvert -
Pages:
7 -
JD has announced its intention to acquire the remaining 49.98% in ISRG (Iberian Sporting Retail Group) from Balaiko Firaja Invest and Sonae Holdings for a total cash consideration of €500.1m. This will be funded from existing cash resources. JD sees an opportunity to continue developing Sprinter and Sport Zone in the Iberian Peninsula as a complementary fascia to the JD format.
The deal is expected to complete in October post a General Meeting in September. Shareholder approval is required as the minority parties are regarded as related parties. Pentland (51.6% shareholding) has given an irrevocable undertaking to vote in favour of the deal together with the directors of JD Sports, and so the Group has irrevocable undertakings to vote in favour of the resolution of 51.6%. No antitrust filings will be necessary.
No change to PBT forecast. ISRG is already fully consolidated. It delivered a PBT of €96.6m in FY23 (£83m at GBP/EUR 1.17). FY24E/FY25E EPS increases by 2%/3% as the minority will halve in FY24 and be fully eliminated in FY25. With JD funding the acquisition with cash, we now forecast IAS17 FY24E net cash of £1.4bn at year end, pre the completion of the Courir acquisition.
This deal tidies up the ownership structure and JD retains complementary brands which gives the Group advantageous scale in the Iberian Peninsula. In addition, given Sprinter and Sport Zone focus on sporting goods, retaining the brands potentially gives the JD fascia another angle of growth in years to come.
Valuation (CY24E PE c.10x) appears undemanding for such a high-quality, long-term growth story. FY24 was always a transitionary year, with 1H growth impacted by the costs of stepping up its opening programme and a normalising promotional environment. A slowdown in the US economy has not helped sentiment short term. However, JD’s geographically diverse earnings means it is capable of delivering double-digit growth for the foreseeable future.