JD Sports agrees £38m sale of Footasylum after UK watchdog ruling

JD Sports has agreed a deal to sell Footasylum to the German asset management firm Aurelius Group for less than half the price it originally paid, after it was finally forced to offload the trainer chain by the UK’s competition watchdog.

The £38m deal will be completed in the coming weeks, putting an end to a saga that started with JD Sports’ £90m purchase of its rival in 2019 as the FTSE 100 group sought to strengthen its position on the UK high street.

The deal had become a long-running financial drag on the company. JD Sports has also spent “heavily” on external competition lawyers – likely to have cost millions of pounds – according to its annual report last month. The company had already taken a £55.6m writedown in 2021 after it realised the value of Footasylum was less than it had thought, and £7.4m in costs in 2020 directly related to the transaction.

The UK’s Competition and Markets Authority (CMA) had major concerns from the start that the takeover of Rochdale-headquartered Footasylum, which has 63 UK stores, would lessen competition. However, JD Sports, which runs 3,400 stores across the UK, North America and other markets, made a notable challenge to the regulator’s authority by successfully arguing in 2020 that the CMA had acted “irrationally” by not considering the effect of the coronavirus pandemic on the market.

Yet the CMA came back, and in September 2021 it again found that competition on price, quality, range and service levels on footwear and clothing could still be reduced if the takeover went ahead.

JD Sports reacted furiously at every stage of the process. Its former chief executive Peter Cowgill argued that the deal would not lessen competition because more and more potential customers were looking online to buy trainers direct from brands such as Nike, Adidas and Puma, who supply to and compete with JD Sports and Footasylum.

However, Cowgill resigned in May – 18 years after becoming chief executive of the company – after a boardroom bust-up related to the splitting of the roles of chairman and chief executive, both of which he held.

His resignation came only months after JD and Footasylum were fined almost £5m for sharing commercially sensitive information during the competition investigation. Cowgill and his counterpart at Footasylum, Barry Brown, were filmed secretly meeting in a car park during the CMA’s investigation. The CMA also said phone records were deleted.

JD Sports attempted to take a more emollient tone on Monday, saying it had “cooperated with the CMA throughout the divestment process”, including checking that the new buyer was acceptable.

Kath Smith, the interim chief executive of JD Sports, 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.”

Dirk Markus, a founding partner of Aurelius, said he would work with Footasylum to increase its online sales and develop “its own brand offerings”.

He said: “As a standalone business, Footasylum has the potential to become an innovative retailer of sportswear and we are eager to unlock the company’s full potential.”