Companies: JJB   

Fully listed sports retailing star JJB Sports today took the market by surprise by launching a £42.3 million bid, at 140p, for budget retail chain TJ Hughes. Elliott Davis reports.

News that the two have agreed terms of a 140p per share offer (investors will be given the choice of cash, loan notes or a combination of the two) had vastly different effects on their respective share price. Hughes made ground – rising 3 per cent to 138p – but JJB shed almost 11 per cent to 366p as some analysts questioned the logic of the deal.

JJB is the latest in a series of suitors interested in taking over the discount retailer and its network of 36 stores. In early 2001, former chairman TJ Hughes was involved in a hostile approach which resulted in £536,000 exceptional costs at the half-year. Then in November negotiations began with another consortium, leading to an offer of just 95p a share.

This bid was dismissed as 'in no way reflecting the fair value of TJ Hughes' and plans for a management buy-out, headed by chief executive George Foster, finance director Andy Goody and operations director Brian Douglas, at 120p were mooted. JJB entered the fray in late January after Hughes published an upbeat Christmas trading statement.

For its money, JJB would be buying a business that generated £78.1 million (£69.4 million) sales and a £1.3 million loss (£2.6m profit) at the half-year stage.