JD Sports has exchanged contracts on the merger of its Spanish and Portuguese business with Sport Zone, owned by local sportswear giant Sonae.

As part of the transaction, JD Sports will also purchase shares in its Iberian business, JD Sprinter Holdings (JDSH), from Balaiko, which is the investment vehicle for the current minority family shareholder in the retailer.

Following completion, JD Sports will own 50% of JDSH, Sonae will hold 30% and Balaiko will own the remaining 20%.

An Iberian giant

With an estimated combined turnover in excess of €450m and a store network of 311 stores, when the deal completes JD Sports and Sport Zone will become the second largest Iberian sports retailer.

Sport Zone has 140 stores in Iberia and turned over €226.7m in 2016 and made pre-tax loss of €27.7m.

Owner, Portuguese corporation Sonae, is a listed group with significant retail experience. This experience will be combined with that of the Segarra family, which manages JD Sport’s Iberian business, to create “an effective and efficient retailer across Iberia” and accelerate growth.

JD Sports also said there would be some streamlining of the organisational structure of the combined business.

JD Sports executive chairman Peter Cowgill said: “Sport Zone is very complementary to our existing businesses in Iberia.

“We believe there are significant opportunities for synergies to be created to improve operational efficiencies and profitability through the combination of the very experienced and knowledgeable management team at Sport Zone and our own expertise as we continue to strengthen JD’s presence in Europe.”

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