The Competition and Markets Authority (CMA) has stepped in to demand changes to JD Sports (JD.L) planned takeover of trainer retailer Footasylum.
The CMA said on Thursday that the deal “could be bad for shoppers”. The watchdog is concerned the deal could give JD Sports too much power in the £5bn sports fashion market and result in higher prices, less choice, or worse service.
“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,” Colin Raftery, senior director at the CMA, said in a statement.
“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.”
JD Sports already owns brands Size?, Scotts, Tessuti, and Footpatrol. It had revenues of £2.1bn last year.
JD Sports must now come up with proposals to alleviate the CMA’s concerns or face an in-depth probe of the deal.
Peter Cowgill, executive chairman of JD Sports, said Footasylum targets “a differentiated customer demographic” and has a “fashion-led product range that is complementary to our existing business.
"Our discussions with the CMA are ongoing as,” Cowgill said. “We look forward to working constructively with the CMA in this regard and will provide further updates in due course."
JD Sports announced a deal to buy Footasylum for £90m in March. The two businesses have close links: Footasylum’s founder David Makin cofounded JD Sports in 1981 and JD’s cofounder John Wardle was chairman until 2015. JD’s former chief executive is executive chairman of Footasylum.
Greg Lawless, a retail analyst at Shore Capital, said in a note to clients: “The CMA is bearing its teeth and taking a much considered look at the competitor landscape in proposed deals, particularly in the retail sector.”
Footasylum, which has 70 stores, has struggled since listing on the stock market in late 2017.
Meanwhile, JD has gone from strength to strength thanks to the boom in athletic-inspired fashion known as “athleisure”. JD Sports is one of the few retail stocks favoured in the City and is currently valued at £7bn.