JJB and Sports Direct cleared in fraud probe but inquiry continues

(BLOOMBERG)

The serious Fraud Office (SFO) has dropped its criminal inquiry into the sports equipment retailers Sports Direct and JJB Sports over alleged cartel activities, but the regulator has vowed to continue its investigation into individuals.

The case was first made public in September 2009 after JJB turned whistleblower in exchange for leniency earlier in the year by approaching the Office of Fair Trading over a "suspected agreement or concerted practice to dampen competition in the sports retail market".

The period of the investigation concerns the employment of Chris Ronnie, the sacked former chief executive of JJB, between 8 June 2007 and 25 March 2009. Mr Ronnie has always insisted he "was not party to any anti-competitive behaviour during the period when he was chief executive at JJB Sports". While concerns remain with the ongoing inquiry into individuals, Sports Direct will be particularly relieved by the SFO's verdict. Sports Direct and JJB Sports are rivals in the sportswear sector and have leading positions in the market for replica football shirts and sportswear.

Sports Direct, controlled by Mike Ashley, the owner of Newcastle United FC, could have faced a fine of up to 10 per cent of the group's turnover, which it reported was £1.37bn last autumn.

Matthew McEachran, an analyst at Singer Capital Markets, the house broker for Sports Direct, said: "This announcement giving Sports Direct a clean bill of health regarding the SFO investigation is what investors were hoping for."

It is unclear which individuals the SFO is still pursuing. But Andy Wade, of Numis Securities, said: "We believe this is likely to relate to the ongoing investigation into Chris Ronnie's actions but does leave open the increasingly remote possibility that Mike Ashley is still under the microscope. Regardless, this is positive for Sports Direct."

The SFO said its investigation into the two companies was complete and it had decided no charges were to be brought. The inquiry followed a separate tussle last year between Sports Direct and JJB's former chairman, Sir David Jones, over the timing of a £1.5m loan which Mr Jones has paid back.

Blacks Leisure receives bids

The outdoor and camping specialist Blacks Leisure confirmed yesterday that it was again the target of multiple takeover bids – news which sent its shares soaring by nearly 30 per cent.

The company behind the Blacks and Millets brands said it had received offers from "several parties", one of which was believed to be the private-equity firm Lion Capital, which owns the parent company of the Cotswold Outdoor chain.

Shares in Blacks, which last year completed a company voluntary arrangement (CVA) – an insolvency procedure to avoid collapse – jumped by 9.5p, or 27.9 per cent, to 43.05p. Before the CVA, Blacks received two bids in early 2009: with Lion Capital again a suitor, as well as Mike Ashley, who controls Sports Direct. Blacks yesterday said there was "no certainty that any formal offers will be forthcoming" this time around.