JJB Sports crashes after bid evaporates and trading stalls

Shares In JJB Sports plunged 19 per cent yesterday as the sportswear retailer revealed it had called off bid talks after failing to agree on a price.

Shares In JJB Sports plunged 19 per cent yesterday as the sportswear retailer revealed it had called off bid talks after failing to agree on a price.

The company, which issued a profits warning after a poor summer, admitted earlier this month it had been approached - by Cinven, the private equity house - about a possible offer.

Tom Knight, the JJB chief executive, said: "We were forced to issue a statement very prematurely. It soon became very apparent there wouldn't be an offer at an appropriate level."

Analysts had estimated the business was worth at least 260p a share. Yesterday its shares, which traded at 327.5p earlier this year, dropped 45.5p to 198.5p.

Mr Knight insisted the group, which is controlled by its founder and chairman David Whelan, had not put the business up for sale. "Nothing could be further from the truth," he said. Mr Whelan, who has a 40 per cent stake, is "very keen to grow the business", Mr Knight said.

He also poured cold water on the suggestion that Mr Whelan would mount a second attempt to buy back the business after the board rejected the chairman's 220p a share offer last year. "I think that is extremely unlikely," Mr Knight said.

After a dire summer, when JJB failed to repeat its early Euro 2004-inspired sales gain, the group unveiled a poor start to its second half. Like-for-like sales were 0.6 per cent lower, while its gross margin fell by nearly 1 percentage point.

With competition among sportswear retailers likely to intensify as general retailers expand their casualwear ranges, JJB is pinning its hopes on a hybrid store-cum-healthclub design. It has already opened 18 combined sites. From 2005, it plans to open 16 such sites each year. Mr Whelan said the profits from the group's leisure division, which rose 17 per cent to £5m at the operating level, gave him "considerable confidence for the future".

In the six months to 25 July, JJB's pre-tax profits fell 11 per cent to £21.5m, while like-for-like sales dropped 1.8 per cent at its core business.

The group is considering whether to appeal against the Office of Fair Trading's decision that found it guilty of price-fixing certain replica kits. It already plans to appeal against the level of the OFT's £8.4m fine.