It didn’t take JD Sports very long to dip into its recently enriched M&A war chest.
On Monday, the British seller of lifestyle-leaning athletic clothing and shoes announced plans to augment its holdings with the $495 million acquisition of DTLR. The in-the-works deal follows its $325 million December purchase of Shoe Palace and strengthens the U.K. firm’s growing foothold across the pond, where Foot Locker remains one of the biggest names in athletic lifestyle retail.
The deal to acquire the “hyperlocal athletic footwear and apparel streetwear retailer” is expected to be finalized later this quarter, JD Sports said, subject to customary closing conditions.
“This is another exciting milestone in the Group’s development in the United States. Like Shoe Palace, DTLR pride themselves on the deep connection they have with their consumers and the active role they play in the communities that they serve. As such, we intend to retain the DTLR Villa fascia and its proposition,” said Peter Cowgill, JD Sports executive chairman. “The acquisition of DTLR will enhance our presence in the north and east of the United States and will be another important step in the Group’s evolution.”
DTLR’s footprint in the densely populated northeastern U.S. complements where JD and Finish Line already operate, and adds a counterpoint to Shoe Palace’s commanding West Coast presence. JD Sports entered the U.S. market two years ago when it acquired Finish Line for $558 million. Matt Powell, senior industry advisor, sports, for NPD Group, noted that “DTLR gives JD access to a geography where Finish Line was under penetrated” while also differentiating the British firm’s portfolio, “much like [how] the operate in Europe.”
What’s more, he added, the acquisitions of Shoe Palace and DTLR “make the JD US divisions more competitive with Foot Locker.”
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The British sports and fashion retailer said $100 million from the $495 million purchase price will be used to repay DTLR’s existing debt. The existing management team headed by Glenn Gaynor and Scott Collins will reinvest a portion of their proceeds back into DTLR in exchange for a new minority stake of about 1.4 percent. They will continue in their roles as co-CEOs for a minimum of three years, based on an agreement that allows them to exercise future exit opportunities.
Majority owned by BRS & Co. and private equity firm Goode Capital, DTLR was founded in 1982 as Downtown Locker Room and was re-branded as DTLR. In 2017, it merged with Sneaker Villa Inc. and now has 247 stores across 19 states.
JD Sports said that for the 52 weeks ended Feb. 1, 2020, DTLR posted $45.6 million in EBITDA (earnings before interest, taxes, depreciation and amortization).