Footasylum shares up 59 pct after JD Sports takes stake

FILE PHOTO - People pass a JD Sports store in London, Britain April 11, 2017. REUTERS/Neil Hall

(Reuters) - Shares in Footasylum Plc soared on Monday after British retailer JD Sports Fashion Plc said it had acquired an 8.3 percent stake and could buy nearly 30 percent of its smaller rival.

JD, which has used a number of corporate acquisitions to assemble its network of more than 2,400 stores over the past two decades, said that it “confirms it is not intending to make an offer for Footasylum” under merger regulations.

But investors drove shares in the company, which is listed on the secondary market of the London Stock Exchange, rose 58.6 percent to 46 pence in the first hour of trading.

Footasylum, started by JD Sports co-founder David Makin in 2005, was forced to cut prices at its 60 stores after a disappointing run up to Christmas which saw British consumers rein in spending.

It now competes with JD Sports, Sports Direct and ASOS among others, which are all feeling the impact of sluggish British consumer spending amid squeezed household incomes and uncertainty ahead of Britain’s impending exit from the European Union.

Makin and fellow JD Sports founder John Wardle were bought out by the company’s current majority owners Pentland Group in 2005 and later resigned as directors.

Footasylum said in January its full-year core earnings would come in at the lower end of analysts’ estimates.

JD Sports shares were up about 1 percent at 454.03 pence.

Reporting by Samantha Machado in Bengaluru; editing by Patrick Graham