Retail rivals JD Sports Fashion and JJB confirmed they were in early talks over a takeover that could create a 700-store sportswear giant.
JD Sports approached its struggling competitor last month with a potential, undisclosed offer but warned there could be no certainty that a deal would be sealed.
The takeover interest comes as JJB battles for survival in the face of deteriorating trade and as it looks to raise millions of pounds of support from key shareholders. Shares in the embattled firm shot up more than 24%.
JJB, which employs 6,300 staff in more than 250 stores, reported an 11.1% decline in like-for-like sales from December 20 to January 23 after a similarly dismal performance over Christmas.
Analysts said JD Sports, which in contrast has maintained like-for-like growth through the weather-hit festive season, could afford to buy JJB Sports. At £30 million, JJB Sports is valued at £5 million less than Newcastle-to-Liverpool footballer Andy Carroll, and is considerably less than JD’s market value of £400 million.
Mark Photiades, analyst at Singer Capital, said the entire exercise could cost JD up to £100 million to complete.
“We believe that JD will have been looking at JJB Sports since their troubles began and will be looking to take advantage of the business’s current weakness,” he said.
However, Mr Photiades also said competition concerns may be raised, considering the 12% share Mike Ashley’s Sports Direct holds in JD.
But Freddie George, retail analyst at Seymour Pierce, said there was little overlap in the store formats as JD’s format is focused on sports fashion where JJB is striving to be viewed as a sportswear specialist.
He said: “JJB Sports’ current trading had been very weak and it was clear the company needed further funding to survive. However, we believe there would be significant opportunity for synergies between the two businesses.”