Hibbett soars 18% on deal to sell to JD Sports for $1.08 billion

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Hibbett soars 18% on deal to sell to JD Sports for $1.08 billion
Credit: © Reuters.

JD Sports Fashion said Tuesday it plans to acquire American athletic fashion retailer Hibbett (HIBB) for approximately $1.08 billion.

JD’s shares rose 6% in London trading, while HIBB soared 18% in the US premarket.

This move by the UK's largest sportswear retailer aims to broaden its presence throughout the southeastern United States.

The announcement comes at a time when shares in athletic clothing retailers globally are facing challenges due to subdued forecasts from leading sports apparel manufacturers like Nike and Puma.

Last month, JD’s U.S. competitor, Foot Locker, issued a warning about its profits for 2024, although Adidas recently increased its forecast for the year, buoyed by strong demand for its sneakers.

JD Sports has agreed to purchase Hibbett shares at $87.50 each in cash, which is about a 20% premium over Hibbett’s last closing price.

The takeover is expected to boost JD Sports' North American revenues to around 4.7 billion pounds, increasing the region's share of total sales from 32% to approximately 40%.

It is also anticipated to improve the British company's earnings in the first full year following the purchase, with anticipated cost savings of at least $25 million.

“This transaction, if completed, will accelerate JD’s NAM presence and roll-out strategy, but increases its exposure to a market that remains challenged at present,” analysts at Citi said.

“We expect a cautious reaction to the announcement, given the group’s high-conviction approach to international expansion at a time of challenged Sports Retail growth,” they added.

JD Sport will finance the acquisition and refinance Hibbett’s existing debt using $300 million of its U.S. cash reserves and a $1 billion increase in its existing bank facilities.

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