Footasylum could run a lot faster under JD's wing after £90m takeover

The price for the troubled retailer seems full but could easily look like a steal in a year or two

Footasylum is being taken over by larger rival JD (PA)

JD Sports boss Peter Cowgill started the week with a bang, announcing the £90m acquisition of Footasylum in a deal that could easily end up adding to his reputation as one of the shrewdest executives left on the high street.

The ‘athleisure’ (ugh) retailer joined the Alternative Investment Market at the back end of 2017, creating a flurry of excitement when it did. The shares debuted at 164p and rapidly added a pound of weight, before swiftly losing it, and a lot more, in a manner that would have some of its 20 something shoppers going green with envy.

A couple of profit warnings in quick succession will do that to you.

The company blamed tough conditions on the high street and delayed openings for a plunge into the red at the half year stage (£4m loss before tax compared with profit of £2.3m in the previous interims).Another alert followed in a January trading statement.

They left the company looking like a mid morning snack for someone like Sports Direct’s Mike Ashley.

Cowgill had, however, taken note and a month later was sitting on an 18.7 per cent stake; enough to make Ashley’s life difficult should he have taken an interest in between butting heads with the Debenhams board, its lenders, and just about everybody else.

Now JD, which had said it didn’t plan to make an offer not that anyone’s really complaining today, is proposing to buy the rest of the shares for 82.5p, which is a better result than some of those who bought in before Footasylum tripped up had any right to expect.

The purchase price is more than 80 per cent above the level at which the bombed out shares closed out Friday. It is also a lot higher than the prices (50p to 75p) JD paid to build up its existing stake.

According to Edison Research, Cowgill is paying a multiple of 30 times forecast earnings for the year to February 2019, 16 times the following year’s profits.

The price could be said to look quite fresh until you consider that it is only 6.8 times Footasylum's historic earnings. The deal also gives JD access to an older different demographic - teenagers are the mainstay of its stores - and a new brand to build up.

Cowgill’s acquisition strategy - he’s also taken on Finish Line in the US - mirrors Ashley’s in that he’s been buying up troubled retailers both here and abroad. His targets just make an awful lot more sense from a strategic perspective.

He still has prove he can turn theses sows' ears into silk purses. But I wouldn’t bet against Footasylum running quite a bit faster with its new trainers.