JD Sports Fashion Plc is about to close the book on Footasylum but not without taking an eight-figure loss in the process.
The Finish Line and Footpatrol owner on Monday said it’s selling the athletic chain to Aurelius Group, which has been cleared for antitrust concerns, for 37.5 million pounds ($46 million) in a deal that should close in the coming weeks. After purchasing Footasylum for 86 million pounds ($112 million) in 2019, JD stands to lose $66 million if the transaction goes through.
JD’s pursuit of Footasylum was troubled from the start. The Competition and Markets Authority (CMA), U.K.’s antitrust watchdog, said their merger could stick consumers with higher prices and fewer shopping choices. JD countered by claiming that big-name brands such as Nike and Adidas are getting more of their sales from direct-to-consumer channels as a result of pandemic-influenced consumer behaviors.
Kath Smith, JD’s interim CEO, said the teams at Aurelius and Footasylum worked with the antitrust watchdog to ensure compliance and approval.
In closing out its Footasylum chapter, JD will also end a contentious period spanning multiple years between the CMA and its former executive chairman and CEO Peter Cowgill, who had been a vocal critic of CMA’s rulings.
Cowgill also got into hot water with the CMA after a video surfaced following a November 2021 ruling that banned the Footasylum merger showing a tête-à-tête between JD executive chairman Peter Cowgill and his Footasylum counterpart, Barry Bown, in a car in July 2021. Before the CMA’s final ruling, it had issued an interim order and instructions for the two leaders concerning their communications with each other. Although JD said the meeting had previously been disclosed to the CMA, it was still fined 4.3 million pounds ($5.8 million) for violating the interim order linked to its banned Footasylum deal.
And the brouhaha over its Footasylum deal wasn’t the only source of JD’s CMA troubles.
In June, CMA also leveled price-fixing allegations against JD and its competitor Elite Sports. The allegations charged that the companies agreed to fix the retail prices of certain Rangers-branded apparel. Both Elite and JD Sports have applied for leniency during the probe and “confessed to cartel activity,” according to CMA. JD Sports said it received a “draft penalty notice” from the CMA, giving the retailer the opportunity to address the preliminary findings before the watchdog issues its final ruling.