Whelan defeated after shareholders reject £517m buyout of JJB Sports

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The planned management buyout of JJB Sports became the latest private equity bid to fail yesterday when the company's chairman, Dave Whelan, abandoned a £517m takeover.

Mr Whelan, who founded the sports retailing group in 1971 and controls 39 per cent of the shares, said: "Whilst I am confident that finance was available to pursue an offer of 220p per share, the independent directors, who have been advised by UBS investment bank, have concluded that the indicative price would not be recommendable to shareholders."

The shares plunged 14 per cent to 186p, well below the value of the offer. One shareholder said: "The company is almost duty bound now to buy-back shares up to 220p. The other point is that if someone else comes in, a marker has been put down on the price."

Richard Ratner, retail analyst at Seymour Pierce, said: "There has to be a bit of a credibility problem. Sentiment will be poor."

There had been speculation that Mr Whelan was struggling to raise the finance for his bid. But the wording of yesterday's statement indicated that it was price rather than finance which proved the stumbling block.

Sources close to Mr Whelan said that the bid had looked a good deal in March when the share price fell below 140p. But with the shares back above 200p and the City beginning to expect a bid of about 250p-260p per share, it had become less attractive.

The abandonment of the JJB bid is the latest in a string of attempted "public-to-private" deals that have foundered due to rising share prices after the end of the Iraq war.

Other deals that have failed include McCarthy & Stone, Somerfield and AWG, while offers for Debenhams, Pizza Express and Hamleys still hang in the balance.

Yesterday's statement from JJB was accompanied by a poor trading update. It said that trading in the 21 weeks to 22 June had been "challenging" due to comparisons with the same period last year, which included the run-up to the World Cup. Turnover and gross margins are lower, but the company said it was confident it would meet market expectations for profits for the full year.

Mr Whelan, who is 67, said he was committed to staying at the company. He said: "I continue to believe in the prospects of JJB Sports, and I look forward to participating in JJB's future success both as chairman and through my significant shareholding, which I remain committed to holding."

JJB Sports has struggled to win back City approval after the poorly received takeover of discount retailer TJ Hughes. The company suffered a further setback last year with the suicide of Duncan Sharpe, Mr Whelan's son-in-law and JJB's chief executive. The company brought in former Blacks Leisure boss Tom Knight to succeed him.