JJB launches rights issue after weekend of high jinx

Sportswear group asks for £100m at 25p a share
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JJB Sports launched its delayed £100m rights issue last night after days of rumour and skulduggery had threatened to derail the cash call.

Investors will be offered new shares at 25p each, a deep discount to yesterday's closing price of 34.75p. The stock climbed 6.1 per cent yesterday.

After a year spent flirting with administration, suffering huge losses, and fighting a lack of stock after credit insurers scaled back protection for JJB's suppliers, the rights issue was trailed as a fulcrum in the group's fortunes.

"Gross proceeds of approximately £100m from the capital raising will provide management with greater operational flexibility," JJB said in a statement. "[It] will allow the company to reduce its reliance on the availability of supplier credit and provide sufficient working capital to rebuild stock levels into 2010 and will provide necessary funds for the implementation of the group's redefined 'serious about sport' strategy."

The executive chairman, David Jones, plans to alter JJB's pitch, taking the company upmarket by offering more sports equipment and reducing its reliance on sportswear, especially football shirts.

The fundraising had been slated for Friday morning before first an accounting discrepancy and then rumours that Sir David had received a huge personal loan from Jayne Sharpe, the daughter of David Whelan, JJB's former chief executive and the owner of Wigan Athletic, threatened to scupper the plans.

The group moved over the weekend to quash the allegations and a spokesman confirmed yesterday that the findings of an investigation conducted over the weekend by JJB's lawyers had been passed to the Financial Services Authority. As part of the investigation Sir David submitted personal bank accounts for scrutiny.

The reports of a new payment follows confirmation earlier this year that Sir David received a £1.5m personal loan from Mike Ashley, the majority owner of JJB's rival, Sports Direct. The payment predated Sir David's appointment at JJB and has now been repaid.

The group always maintained that the cash call would be launched and gained support yesterday when it was confirmed that the group's two biggest backers – Harris Associates and Crystal Amber are to fully subscribe. Some analysts remain sceptical about the new rights issue however, arguing that JJB is still in a precarious state.

"This is a lot more money than anticipated and it is surprising because JJB has not really progressed that much on earlier in the year," said Kate Heseltine, a retail analyst at Seymour Pierce. "Others have been able to make progress in the sports equipment sector and there is a long way to go before you can point to JJB as being an independent leader."

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