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Debt-strapped retailer sacks CEO for failure to reveal sale

By Robert Barr | March 27, 2009, Friday | Print Edition

DEBT-STRAPPED retailer JJB Sports PLC said yesterday it has fired its CEO for failing to disclose on time the sale of his stake in the company, while also announcing the sale of its fitness clubs business to the company's founder for 83.4 million pounds (US$121.8 million).

Christopher Ronnie was fired for gross misconduct after failing to inform the company on time that he had disposed of his 27.5-percent shareholding in January. Under disclosure and transparency rules, directors must notify their company within four days of any share dealing made for their benefit.

The shares were held by Guro Leisure Ltd, in which Ronnie held a 50 percent stake. Ronnie said he didn't know when the shares had been sold nor at what price, JJB said.

No financial settlement was agreed with Ronnie, who was dismissed on Monday, while finance director David Madeley notified the company that he intends to resign at the end of May, JJB said.

Sale cuts debt

The company's shares were up 16 percent at 16.25 pence in London.

The sale of the 55 fitness clubs to founder David Whelan, who severed his connections with JJB in 2007, will help the company reduce its debt and provide working capital, the company said.

"JJB remains at the mercy of its lenders. Nevertheless, it still has a chance to pull through if everything goes to plan," said David Stoddart, analyst at Altium Securities.

The sale was rushed through under regulatory provisions for companies in severe financial difficulty, skipping the usual requirements for issuing a circular and gaining shareholder approval.

JBB said it is seeking a company voluntary arrangement - a legal procedure to help rescue a struggling firm - to shield it from claims for rent on 140 closed stores and to vary the rental terms on 250 stores still open.

The company said it has secured 50 million pounds in short and medium-term financing from Lloyds and Barclays.

JJB reportedly owes 60 million pounds to three banks - Barclays and HBOS in Britain and Iceland's Kaupthing bank.

It disclosed in January that it expected a record pretax loss of as much as 10 million pounds for the year ending January 25.

Last month, JJB placed its loss-making Lifestyle division in administration, a form of bankruptcy. It operated 64 Original Shoe Company Ltd stores and 13 stores under the Qubefootwear Ltd brand.

"In announcing our series of measures today (Thursday), we have taken the first step in securing JJB's long-term future after months of speculation," said David Jones, the company's executive chairman. "We have worked very hard with our advisers and lending banks to propose a robust, solvent restructuring of the group that we believe is in the best interests of all of our stakeholders."

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