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JD Sports Acquires Finish Line

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Merger completion

Sportswear retailer Finish Line (FINL) announced today that its merger with JD Sports has concluded. With the merger complete, Finish Line has become the indirect wholly owned subsidiary of JD Sports.

The deal was pegged at $558 million and announced in March. Under the deal, Finish Line shareholders get $13.50 per share in cash, which is a ~28% premium to the share price as of March 23.

On a year-to-date basis, Finish Line stock is trading down 7% to $13.51 as of June 15. Foot Locker (FL) and Deckers Outdoor Corporation (DECK) have registered gains of 21.3% and 48%, respectively.

The utility of the merger

The merger should help Finish Line gain a competitive advantage in the US market. JD Sports is a big name in the European footwear space. The expansion of e-commerce and resulting price wars has left most retailers high and dry. Plus, leading sports brands Nike (NKE) and Adidas are working on boosting their D2C (direct-to-customer) channels, creating more trouble for other sportswear retailers. Finish Line’s fiscal 2018 sales were down 0.3% to $1.8 billion, and its comparable store sales were down 3.9%.

The merger should also help JD Sports penetrate the US market. Finish Line’s strong store base and digital capabilities could come in handy for JD Sports.

Finish Line is diverting plenty of resources toward store remodeling and new store openings in ritzy locations like the Del Amo Fashion Center in Los Angeles.

The company is working on its D2C business to augment sales. The company’s app is being revamped to incorporate geo-fencing technology for customized offers. It’s also improving the checkout process

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