Why Sports Direct Coughed Up $101 Million for Two Bankrupt US Retailers

Why Sports Direct Coughed Up $101
Eastern Mountain Sports

Just days after Sports Direct took a 7.9 percent stake in Finish Line, the U.K.-based retailer took a more aggressive step to become competitive in the U.S. market.

In a move that was widely anticipated, Sports Direct said on Friday it was granted approval by the Delaware Bankruptcy Court to buy two retailers out of bankruptcy: Eastern Mountain Sports and Bob’s Stores, both owned by Eastern Outfitters LLC.

Sports Direct said it would pay a total of $101 million in cash for the deal, expected to close next month.

The company said the acquisition of about 50 stores would “provide Sports Direct with a footprint in U.S. bricks-and-mortar retail and a platform from which to grow U.S. online sales.”

Earlier this week the retail giant took a significant stake in Finish Line that had at least one market watcher speculating a takeover was on the horizon.

“It appears to us that Sports Direct is actively making an effort to purchase Finish Line, despite the fact that no mention of an active position was mentioned in the [SEC] filing,” Susquehanna Financial Group LLP analyst Sam Poser wrote Monday. “The purchase of all of Finish Line would provide leverage for Sports Direct’s total operation as well as provide better vendor terms from the likes of Nike, Adidas, Under Armour and others.”

Sports Direct, which was founded in 1982 by British billionaire Mike Ashley and now has 455 sports stores in the U.K., has rapidly expanded its interests in the American market.

In January, the British retailer acquired stakes in Dick’s Sporting Goods and boosted its holdings in Iconix Brand Group.

Before that, it had purchased 4.3 million shares in Iconix, or 9 percent of the troubled firm.