British sportswear retailer JD Sports is in talks over a potential takeover of struggling rival JJB Sports in a move which would see the creation of one of the UK’s biggest high street chains.
The two companies confirmed they were in initial discussions but said it was not certain an offer would be made.
Wigan-based retailer JJB, which operates nearly 250 stores and employs 6,300 staff, was recently thrown into a battle for survival after it revealed that a major promotional drive had failed to deliver results.
The company reported that like-for-like sales decreased by 15.7% between November 8 and December 19.
It announced in December it was to turn to investors, including the Bill & Melinda Gates Foundation Trust, to raise more than £30m (€35m) in a rights issue.
The group raised £100m (€116m) from investors just over a year ago.
Last week its troubles increased when it was fined £455,000 (€532,000) by the Financial Services Authority for failing to disclose it had bought two smaller rivals for £16m (€18.7m) more than it told investors.
JD Sports Fashion has fared far better lately, shrugging off the disruption caused by the snow in December as it revealed another better-than-expected trading performance and an uplift in profits.
The sports and fashion retailer said like-for-like sales at its UK stores, which include 350 JD Sports and Size? outlets, were up 2.5% in the last five weeks of 2010.
The better-than-expected Christmas trading performance meant that group like-for-like sales were up 3.1% in the 48 weeks up to January 7, with sales improving in the second half of the year.
While many of its competitors were discounting heavily, JD said it had increased sales without dropping its profit margin.
It has expanded its appeal in the last year after it acquired brands such as Sonneti, Chilli Pepper and Nanny State to help give it a point of difference over competitors.
It also moved into France last year with the acquisition of Chausport, and snapped up Dublin firm Champion Sports.
And JD has big plans for its fashion brand Bank, which is mainly based in the North and Midlands and sells branded items aimed at teenagers and those in their 20s.
Reports have suggested that an approach about a deal was made by JD several weeks ago.
In a statement, JJB said: “Further to the press speculation... JJB Sports plc confirms that it is in initial discussions with JD Sports Fashion plc in relation to a potential offer.
“The highly preliminary nature of these discussions is such that there can be no certainty that any offer will be made or as to the terms of any offer.”
A statement from JD confirmed it was in “early stage discussions” with JJB’s board about making an offer for JJB.
“There can be no certainty that an offer will be made by JD Sports Fashion for JJB Sports, nor as to the terms on which any offer might be made. A further announcement will be made in due course,” it added.