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OFT to probe Sports Direct stake in Blacks

The Office of Fair Trading is investigating Sports Direct’s stake in Blacks Leisure which it won ownership of in a High Court claim last week.

The Office of Fair Trading (OFT) is considering whether a merger situation has been created as a result of Sports Direct owning the 29% stake. Sports Direct also owns outdoor retailer Field and Trek.

If the OFT finds a “relevant merger situation” it will consider whether it may lead to a “substantial lessening of competition” in the outdoor retail sector and if so will pass it on to the Competition Commission to investigate.

In March Sports Direct made a bid for Blacks but pulled out over concerns that major suppliers would not supply the business if the sports retailer’s bid was successful.

Last week, Sports Direct won a High Court claim over disputed shares in its rivals.

The sports specialist founded by Mike Ashley took a £53m hit when it had to write off stakes in Blacks Leisure and JD Sports Fashion which were lost when the Iceland banking system collapsed in 2008.

Last week, the High Court ruled that Sports Direct had bought the shares in question from Kaupthing Singer & Friedlander (KSF), a subsidiary of Icelandic bank Kaupthing, before it collapsed.

The dispute between KSF’s liquidators Ernst & Young and Sports Direct had arisen as the shares had originally been pledged as security against a loan from a subsidiary of Kaupthing. KSF had refused to hand over the shares without first receiving cash for the loan. Sports Direct did not want to hand over cash before receiving the shares.

An agreement was later made to sell the shares, by which time their value had risen. The legal aspect of the dispute was whether Sports Direct should pay the difference in shares from when it first tried to buy them and the date they agreed to sell them.

Sports Direct bought back its 29% stake in Blacks and went on to make an unsuccessful bid for the outdoor retailer.  

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