The Footway Group, a Swedish online shoe retailer that is expanding internationally, announced on Feb. 17 that it wants to buy Sportamore, a leading Swedish online retailer of sports products. Footway has offered to pay 439 million kronor (€41.5m-$44.9m) in cash and shares for Sportamore, or a premium of around 15 percent over the company’s previous share price. 

The proposed merger of Footway and Sportamore would create a pure e-commerce player that can take advantage of the ongoing turbulence in the local brick-and-mortar sports retail market, said Daniel Mühlbach, chief executive of Footway, in a press release, evidently referring to the recent bankruptcy of Gresvig and the financial problems at XXL (see the previous issue of SGI Europe). 

The merger of Footway and Sportamore would probably raise their bargaining power with the major sports brands. Many of the shoe models prominently displayed on Footway’s websites are sneakers, which are very much in fashion all over Europe. 

The two companies are more or less the same size, and both of them have been keen on expanding their online retail operations outside the weather-dependent Nordic markets, but Footway has been ahead of the race. In reporting growth of 11 percent to SEK 1,053 million (€99.4m-$107.6m) in its turnover for the past year, after a poor fourth quarter, Sportamore said that it is forecasting slower growth than planned in the French market because it first wanted to ensure a satisfactory profitability in its core markets. 

Sportamore was able to improve its gross margin by 1.9 percentage points to 36.5 percent in the fourth quarter of last year. The operating margin (Ebit) fell by 2.3 percentage points to 0.5 percent year-on-year, although it improved by 0.3 percentage points excluding higher marketing costs. It backed out of a deal with a keyword marketing partner after collaborating for two months. 

Sportamore has described itself as the Nordic region’s leading e-tailer for sports-related products, selling over 30,000 products from about 300 different brands in more than 30 different sports categories. Its websites were visited by more than 54 million people in 2018. The company started trading on Nasdaq Stockholm in May 2005. It has been awarded prizes for retailing, e-commerce and customer service. 

Founded in 2010, Footway is a pure online shoe retailer that is expanding well beyond the Nordic countries. Its sales grew last year by 30.4 percent to SEK 991 million (€93.6m-$101.2m), despite a weather-related slowdown in the fourth quarter, generating an operating profit (Ebit) of SEK 14.8 million (€1.4m-$1.5m). 

As we have already reported in Shoe Intelligence, Footway’s sales outside the Nordic countries grew last year by 81.7 percent, contributing to more than 80 percent of the growth, and the company launched its online platform in a further 13 markets outside the region. The number of visitors to its online stores increased to 15 million in 2019, compared with 12 million a year earlier. 

Footway’s offer has received preliminary approval from Sportamore’s board of directors, which agreed with the logic behind the proposal and the purchase price, but said it was evaluating the offer with its advisors and would publish a formal statement as soon as possible. The board represents about 33 percent of Sportamore’s equity. One of the supporters is J3 Brunkeberg Invest, an investment company whose owners include Johan Ryding, Sportamore’s chief executive, who sold 5 percent of his shares in the company a few months ago. 

Footway published its formal offer document on March 13, setting April 3 as the deadline to receive tenders. 

The offer calls for an exchange of shares by Sportamore’s main shareholders, who own 33 percent of its equity, with shares in Footway. The others could opt instead to get SEK 46.4 in cash for each share in Sportamore, whose share price is currently below SEK 45. 

Footway said it has secured additional financing worth 150 million Swedish kronor (€13.8m-$15.3m) for the planned acquisition. It has entered into a credit agreement with Svea Ekonomi with a maturity of five years. The board of Sportamore, which is the largest online pure player in the Scandinavian sporting goods market, has recommended acceptance of Footway’s takeover offer. 

Industrifonden, a leading shareholder in Footway, has undertaken to participate in a new share issue to finance its bid for Sportamore. However, the company’s chairperson, Birgitta Stymne Göransson, has resigned as a director of Sportamore in connection with the bid. 

Carnegie Investment Bank has been hired as a financial advisor and the Kanter law firm as legal advisor for Sportamore.