Blacks Leisure in death spiral as Sports Direct pulls out

Sports Direct, the discount sports clothing chain, has withdrawn its offer for Blacks Leisure, sending the hobbled high street retailer's shares into a potential death spiral.

Blacks put itself up for sale on 7 December after a terrible year in which profit warnings had driven its share price down 90%.

On the 13th of this month Sports Direct, which was founded by Mike Ashley, the owner of Newcastle United FC, confirmed it was in discussions over a possible transaction.

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Clearly no deal could be reached, despite the fact Sports Direct is a major stakeholder in Blacks, for whom the options now look very bleak indeed.

It's been reported the company needs to refinance a £40m overdraft facility by February with the FT claiming the firm needs £20m in fresh equity to renovate its stores.

News of the offer withdrawal has seen Blacks shares drop 27% in early trading. It's market cap is now just £1.39m, this for a chain with a 300 store foot print in the UK.

Sports Direct's decision to pull out of the transaction has, however, been greeted warmly by investors, perhaps betting it can now acquire Black's assets at bargain prices. At 9.20am in London SPD was up 8.37% at 205.8p

BS