The largest British sportswear retailer JD Sports’ US subsidiary Genesis Holdings has just bought the US-based retailer Shoe Palace for a total of $681 million through cash and equity in a move to strengthen its foothold in the US market.
Takeover Consideration
The UK sports-fashion seller will pay $325 million in cash while issuing shares of $356 million to the founders of the Shoe Palace, the four Mersho brothers. The transaction will result in the Mersho brothers owning 20% shares of the enlarged group in the US.
Out of the $325 million cash consideration, $100 million will be paid through a deferred payment subsequently over the next 12 months. Post the takeover, the Mersho brothers will continue to manage Shoe Palace with a collaboration of ideas from JD Finish Line and Shoe Palace teams from next year.
JD Sports – Augmenting US Market Position
Founded in 1981, JD Sports started operations in the US in 2018 when it acquired Finish Line, an American sports shoe retailer, for over $400 million. With the new acquisition of Shoe Palace, the Bury-based retailer hopes to increase its popularity among Hispanic and Latino consumers that form a major part of Shoe Palace’s market. After the news of the takeover unveiled, the firm’s shares rocketed by 5%.
How Shoe Palace’s Diversified Presence Can Help JD
Shoe Palace has a total of 167 stores across the US. Apart from giving JD a strong presence on the West Coast, Shoe Palace also has stores across California, Texas, Nevada, Arizona, Florida, Colorado, New Mexico, and Hawaii. Moreover, the family-owned firm’s online platform is also growing.
JD Sports’ Talks With Debenhams
JD was recently in the talks of taking over the collapsing British multinational retailer, Debenhams, but refused to do so in early December. Debenhams had been on the verge of falling and JD was its final potential bidder and hope of rescue. The news of JD, not bidding was the last blow to Debenhams.
Shoe Palace – Entrepreneurial Journey Of Four Brothers
The San Jose-based Shoe Palace was founded in 1993 as a family business by four brothers of the Mersho family. Initially, the four siblings used to sell things like stereos, watches, and shoes at a local flea market with their father. That’s where their entrepreneurial journey embarked.
The family realized the gaining popularity of their trainers and decided to put in extra effort by taking extra stalls. They eventually got a $10,000 loan to launch their first retail shop. Today, the small business has grown to earn millions for the family.
As of last year, Shoe Palace earned $435 million in revenue and $52 million in profit before tax. The gross assets were worth $197 million.
The chief executive of Shoe Palace, George Mersho, expressed his excitement by saying that there wasn’t a better way to continue building the legacy of the family business.
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