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Mike Ashley's Frasers Group buys fitness chain DW Sports Mike Ashley's Frasers Group buys fitness chain DW Sports
(about 7 hours later)
Frasers Group to pay initial £37m for ‘certain assets’, which excludes DW business nameFrasers Group to pay initial £37m for ‘certain assets’, which excludes DW business name
Mike Ashley’s Frasers Group has acquired the gym and fitness chain DW Sports in a deal potentially worth up to £44m. Mike Ashley’s Frasers Group has acquired the gym and fitness chain DW Sports in a deal potentially worth up to £44m, but only half of the company’s jobs have been saved.
DW Group, founded by the former Wigan Athletic owner Dave Whelan, fell into administration last month, putting 1,700 jobs at risk. The group operates 73 gyms and 75 shops across the UK. DW Group, founded by the former Wigan Athletic owner Dave Whelan, fell into administration last month, putting 1,700 jobs at risk, and Monday’s deal safeguards 922 of those.
Frasers Group, which also owns Sports Direct, House of Fraser, Evans Cycles and Flannels, is to pay an initial cash consideration of £37m for “certain assets” of the business. The overall deal, which excludes the DW business names and intellectual property, could be boosted by up to a further £6.9m, depending upon how many of the property lease holdings Frasers Group acquires. Administrators BDO said 43 of the group’s 73 gyms – three not yet reopened – and 31 of its 50 shops had been transferred to Frasers Group. The rest have been closed but some may be reopened by Frasers in due course, said BDO.
The company said it was “pleased to have saved a number of jobs” but did not say how many employees would be retained with the business. DW’s Fitness First Clubs have been unaffected by the administration and the subsequent sale.
Sports Direct said it intended to run the business using its Everlast brand, the American boxing kit manufacturer made famous by Muhammad Ali, which the business acquired in 2007 for $168m. Frasers Group, which also owns Sports Direct, House of Fraser, Evans Cycles and Flannels, is to pay an initial cash consideration of £37m. The overall deal, which excludes the DW business names and intellectual property, could be boosted by a further £6.9m, depending on how many of the property lease holdings Frasers Group acquires.
The company said it intended to run the gym and fitness business using its Everlast brand, the American boxing kit manufacturer made famous by Muhammad Ali, which the business acquired in 2007 for $168m (£128m).
“The transaction complements the existing gym and fitness club portfolio within the company’s group and is consistent with the group’s elevation strategy,” the company said. “Frasers Group looks forward to elevating the gym and fitness assets acquired … under the group’s existing Everlast brand.”“The transaction complements the existing gym and fitness club portfolio within the company’s group and is consistent with the group’s elevation strategy,” the company said. “Frasers Group looks forward to elevating the gym and fitness assets acquired … under the group’s existing Everlast brand.”
For the year to the end of March, DW’s accounts show the business had assets worth £194m but ran up a loss of £20m.For the year to the end of March, DW’s accounts show the business had assets worth £194m but ran up a loss of £20m.
“Mike Ashley’s Frasers Group has a track record in snapping up distressed firms and, given DW Sports was a former rival to Sports Direct, it’s an acquisition that is perhaps even more appealing,” said Susannah Streeter, senior investments and markets analyst at Hargreaves Lansdown.
“It’s likely to be some time before people bound back to the gym in greater numbers and it can be ascertained whether this latest acquisition will have been the right choice for the company.”
BDO’s Graham Newton said: “We are pleased to have achieved a sale of a significant part of the DW Sports business as a going concern, as this will not only secure employment for the majority of employees, but should also result in a return to the company’s creditors in due course.”
Last week Frasers Group threatened to close stores if landlords did not agree to move to rents based on sales figures, saying that Brexit and the coronavirus pandemic had led to “the most challenging year in the history of the company”.Last week Frasers Group threatened to close stores if landlords did not agree to move to rents based on sales figures, saying that Brexit and the coronavirus pandemic had led to “the most challenging year in the history of the company”.
Underlying pre-tax profits for the group fell by 18% to £117.4m in the year to 26 April. Sales at its core sports business decreased 14.6%, but edged up 0.7% including the contribution from the digital gaming group Game, which is now part of that division.Underlying pre-tax profits for the group fell by 18% to £117.4m in the year to 26 April. Sales at its core sports business decreased 14.6%, but edged up 0.7% including the contribution from the digital gaming group Game, which is now part of that division.
Total group revenues increased from £3.7bn to £3.9bn after a number of acquisitions including Game, Sofa.com and the fashion brand Jack Wills.Total group revenues increased from £3.7bn to £3.9bn after a number of acquisitions including Game, Sofa.com and the fashion brand Jack Wills.
Shares in the group rose more than 13% to 347p as analysts said Frasers had weathered the pandemic well, benefiting from higher demand for sportswear, bikes and casual clothing in the shift to working from home.