2nd UPDATE: JJB Sports Equity Issue To Proceed Imminently

Date : 10/12/2009 @ 11:18AM
Source : Dow Jones News
Stock : Sports Direct International (SPD)
Quote : 375.8  2.4 (0.64%) @ 11:35AM
Sports Direct share price Chart

2nd UPDATE: JJB Sports Equity Issue To Proceed Imminently

JJB Sports (LSE:JJB)
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Struggling U.K. sportswear retailer JJB Sports PLC (JJB.LN) will launch its GBP100 million equity issue imminently, its largest shareholder said Monday, after the plans were delayed by an apparent smear campaign aimed at derailing the cash call.

Richard Bernstein, fund manager at activist investment fund Crystal Amber Fund Ltd. (CRS.LN) which has a 14% stake in JJB, said: "I think it's just a case of re-confirming all those who were due to subscribe as soon as possible. It shouldn't be too long."

The cash call had initially been delayed by a technical matter Thursday, but on Saturday JJB issued another statement to say it was holding back the fundraising round to investigate rumors about the financial affairs of its executive chairman and interim Chief Executive David Jones.

According to the Sunday Times Newspaper, the allegations centered on suggestions that the daughter of former JJB Sports Chief Executive Dave Whelan had made payments to Jones' bank account at the time when Whelan was in talks to buy JJB's Health Clubs division.

A JJB Sports spokesman Monday said Jones wouldn't be commenting on the claims.

JJB said the rumors were "totally unfounded" and it is "very concerned" by their timing and nature. It has passed details of its investigation to the relevant regulatory authorities.

Bernstein said: "We don't know where the rumors started. We got a call on Friday saying the placing wasn't going to be done, but it was the lesser of the evils. What we don't want is someone joining as a shareholder and then saying they wouldn't have got involved if things had turned out differently."

It is the latest twist in the tale of the Wigan, England-based retailer, which last month posted a massive first-half pretax loss of GBP42.8 million and was recently revealed, along with high-street rival Sports Direct (SPD.LN), as the subject of a U.K. Serious Fraud Office probe on alleged price-fixing.

Earlier this year, Jones faced a showdown with shareholders after it emerged he took a loan from business rival Mike Ashley, owner of Sports Direct.

JJB announced at the time of its interim results in September that it had begun the process of looking for a full-time chief executive, following the dismissal in January of former CEO Chris Ronnie over a messy share transfer.

Ronnie was suspended when it was discovered that liquidators of collapsed Icelandic bank Kaupthing Bank had seized his 27.5% stake in JJB. He resigned a short while later.

A JJB spokesman Monday wouldn't comment on claims that Steve Johnson, who was at the helm of retail stalwart Woolworths when it collapsed at the start of the year, is one of two names in the frame as Ronnie's successor.

Last month, Jones told Dow Jones Newswires a permanent replacement was expected to be announced by the end of January.

JJB's board said it continues to fully support Jones, who resurrected fashion chain Next (NXT.LN) in the 1980s.

Seymour Pierce analyst Kate Heseltine downgraded JJB to a "sell" rating from "hold" Monday and in a note to clients said the fundraising amount is "excessive in light of the limited progress made with the turnaround plan."

She expects the firm will launch a placing and open offer, priced in the region of 20 pence to 25 pence.

JJB said it has received indications of interest from investors in excess of three times the size of the proposed capital raising.

Company Web site: www.jjbsports.com

-By Hannah Benjamin, Dow Jones Newswires; 44-20-7842-9298; hannah.benjamin@dowjones.com

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