Ashley mulls takeover bid for Blacks after cash call veto

Outdoor chain could be worth £30m, but Blacks presses on with fund-raising
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The Independent Online

Mike Ashley's Sports Direct chain is considering a takeover bid for the outdoor specialist Blacks Leisure, he revealed yesterday.

The move by Mr Ashley, the multimillionaire founder of the retailer and owner of Newcastle United Football Club, came days after Sports Direct acquired a 28.5 per cent stake in Blacks, a holding large enough for it to block Blacks' plans for a £20.3m cash call to fund the opening of new stores, refurbish its estate and cancel a bank lending facility of £7.5m.

Blacks had been seeking the support of Sports Direct for the cash call, but on Monday night the sportswear group, which has 313 shops, turned the tables and told its rival it was evaluating a possible cash offer for the operator of the Blacks and Millets chains.

Mr Ashley's decision to block the £20.3m firm placing and open offer scheduled for last Wednesday had fuelled speculation of a potential bid, particularly since Sports Direct made an indicative offer for the chain in early 2009.

Sports Direct had been in a dispute over the 28.5 per cent stake in Blacks with the administrator to Kaupthing Singer & Friedlander, the UK arm of the collapsed Icelandic bank, but Ernst & Young sold it back the shareholding last week. City analysts were divided yesterday about a potential bid price for Blacks, which they noted was a recovery play, and questioned whether a formal offer would be forthcoming.

Nick Bubb, a retail specialist at Arden Partners, said: "My gut feeling is that Sports Direct would not bid more than 60p."

Freddie George, an analyst at Seymour Pierce, pointed out that, with Sports Direct having acquired its 28.5 per cent stake in Blacks for about £6m, the full cost of a takeover could be between £25m and £30m. This would take into account Sports Direct paying a slight premium and the rise in Blacks' share price yesterday.

Andy Wade, an analyst at Numis, said he could "understand the rationale behind Sports Direct's interest", citing the scope for cutting back on Blacks' central operating costs of about £15m and its portfolio of shops after the company ditched loss- making stores in its company voluntary arrangement last year.

He said: "Moreover, Sports Direct's lifeblood has always been brands, and Blacks owns – among others and in addition to its fascia brands – Peter Storm, Eurohike, Technicals, ALS and Freespirit."

In the absence of concrete proposals from Sports Direct, however, Blacks said it intends to pursue an alternative equity financing for the £20.3m, such as a rights issue, which would only require the support of investors representing 50 per cent of its shares.

Yesterday, shares in Blacks Leisure surged by 7.75p, or 15.1 per cent, to 59p, giving it a market capitalisation of £25.16m. Shares in Sports Direct also jumped by 6.9p, or 6.5 per cent, to 112.9p.