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JD Sports has agreed to sell Footaslyum for £37.5 million and incur a hefty loss after being ordered to offload the high street footwear firm by the UK competition watchdog.
It represents a more than £50 million loss for the retail group after it first agreed to buy its smaller rival in a move worth over £90 million.
The sportswear group – which owns Tessuti and Go Outdoors – will sell Footasylum to private equity firm Aurelius Group, which recently acquired the parent company of Lloyds Pharmacy, McKesson UK.
The Competition and Markets Authority (CMA) clamped down on JD Sports’ buyout of Footasylum last November following concerns it harmed competition in the footwear market and would lead to a worse deal for Footasylum customers.
The sportswear giant had bought Footasylum for in a deal arranged in March 2019, before the CMA intervened and ordered it to reverse the acquisition after a lengthy investigation.
The long-term boss of JD Sports, Peter Cowgill, resigned from the company in May after it was hit with a £4.3 million fine for sharing commercially sensitive information with Footasylum.
Mr Cowgill had met his opposite executive at Footasylum in a Bury car park to exchange information, according to a video seen by the Sunday Times.
The CMA argued there was a “black hole” surrounding the meeting as neither could remember “crucial details” about the exchange and reported no notes, agendas or emails afterwards.
Board member Kath Smith, who previously worked for Adidas and Reebok, took over as interim chief executive while the company looks to hire permanently.
And in July, the firm hired former Morrisons boss Andrew Higginson as its new chairman as part of its plans to shake up its corporate governance structure.
Ms Smith said: “I would like to sincerely thank the teams at Aurelius and Footasylum who worked collaboratively with the CMA to agree this transaction.
“We wish both parties every success for the future.”
The sale is expected to complete in the coming weeks.
Shares in JD Sports fell by around 1.4% following the announcement.
AJ Bell’s Russ Mould described the takeover of Footasylum as a “costly mistake”.
“Forced to sell by the competition regulator, it has made a pretty staggering loss of nearly 60% on an investment made just three years ago,” he added.
“However, the real costs run greater than just the financial.
“Events surrounding the doomed transaction contributed to the departure of its executive chairman Peter Cowgill, after a highly successful tenure, and damaged the company’s reputation for good governance.”