Is JJB Sports susceptible to a takeover?
As we covered yesterday, JJB Sports is desperately seeking to raise around £50 million to increase the company's working capital resources. While a number of options have been considered it seems as though the company is priming the market for a significantly discounted rights issue or open offer. This would see additional shares issued to existing investors at a significant discount to the current share price. As a consequence, investors were today selling JJB Sports shares which fell by around 25% after the news over the weekend.
JJB Sports appears to be a victim of the downturn in business on the UK high street despite the fact it has been very prominent in the sportswear department for some time. Newcastle United owner Mike Ashley has been something of a thorn in the side of the company having picked up a significant stake some time ago in a company owned by his archrival Dave Whelan. The future of the group is certainly at the centre of much speculation at the moment although there are very few people who believe it will eventually go out of business.
Whether the directors decide to issue further shares, as appears likely, or dispose of non-core assets to increase working capital for the core business remains to be seen. However, whatever is decided is likely to be put into practice very soon.
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