Troubled Blacks stays bullish as takeover bid looms

SPORTS Direct, the retail group headed by Newcastle United owner Mike Ashley, is considering a bid for Blacks Leisure just days after scuppering fundraising plans put forward by the troubled outdoor retailer.

• Mike Ashley's Sports Direct may bid for Blacks, though price could be an issue. Picture: Lewis Houghton

Sports Direct, which owns 28.5 per cent of Blacks, said it was "evaluating a cash offer" for the business which also includes the Millets brand.

Blacks responded by saying that, in the absence of any concrete takeover proposals from Sports Direct its board could recommend, it would pursue an alternative fundraising.

Although analysts believe a deal could make good sense for both companies, price is likely to a major stumbling block.

Nick Bubb of Arden Partners said: "The business is probably worth more to Ashley than anyone else in the market, but there's no doubt he'll play hardball on price and possibly even bid less than it is currently trading at just to make a point."

Sports Direct, which owns Sports World and Lillywhites stores as well as brands including Slazenger and Lonsdale, stressed there was no certainty any bid would be made for Blacks.

Shares in Blacks rose by 15.1 per cent to 59p yesterday, valuing the business at 25.3 million. Shares in Sports Direct gained 6.5 per cent to 112.9p.

Andrew Wade, analyst at Numis Securities, said there was a clear rationale for Sports Direct's interest in the company.

He said Blacks' recently reduced store portfolio offered an attractive base for recovery and he believed there was scope for cutting 15m of central costs.

Blacks also owns a valuable portfolio of brands including Peter Storm, Eurohike and Freespirit, all in the outdoor market which Sports Direct is currently under-represented in.

Last Wednesday Blacks adjourned a meeting to vote on a 22m fundraising after Sports Direct said it would use its stake in the firm to block the proposal. Blacks needed 75 per cent shareholder approval for the fundraising to go through, but would have been unable to see it passed without the backing of Sports Direct.

The retailer then entered talks with Sports Direct with a view to gaining its support for the fundraising but was told on Monday night the firm was considering a cash offer.

Blacks – which struck a rescue deal with creditors in November that saw it close a total of more than 100 stores – needs the money to accelerate a recovery plan.

It has endured a torrid past couple of years, leading to a restructuring and the closure of 87 loss-making stores in the fourth quarter of 2009 after securing a rescue deal with its landlords.

It has since reported improved trading and now wants funds to refurbish its core estate and reopen shops in areas where it has closed stores.

Blacks' history stretches back to the 1860s when Thomas Black set up a sail-making business in Greenock.

The company now has 208 stores under the Millets brand and another 92 Blacks shops.

It employs around 3,500 store staff and 450 at its head office and distribution centre in Northamptonshire.