Ronnie probe starts at JJB
JJB SPORTS yesterday said that it was formally investigating “improper expenses claims” made by its former chief executive Chris Ronnie.
The sports retailer, which also confirmed a well-trailed £100m rights issue, alleges that it was brought to the brink of insolvency by Ronnie and former executives due to a series of “unwise management decisions”.
The company now says that it is investigating the seizure of Ronnie’s 27.5 per cent stake by Icelandic bank Kaupthing.
It has also launched an inquiry into the alleged misuse of company credit cards and the personal use of company assets.
And Ronnie faces scrutiny over an alleged lack of compliance with transparency rules in the lead-up to a trading update to the markets on 24 July 2008.
JJB Sports has been embroiled in fresh controversy in recent days, thwarting attempts to turn it around by executive chairman Sir David Jones.
The embattled sportswear retailer had to halt the announcement of its £100m rights issue on Friday after an “unfounded smear campaign aimed at derailing the fundraising” worked its way around the market and press.
But after investors were reassured that the rumours were untrue, the company succeeded in its issue of 400m new shares at the heavily discounted price of 25p through a firm placing and open offer.
Panmure Gordon and Numis are acting as joint broker, bookrunner and underwriter, while Lazard is the company’s financial adviser.
Yesterday it was revealed that the advisers will pocket six per cent of the funds raised as fees.
And the group said that its five executive directors would each get 0.91 per cent of the enlarged share capital. JJB shares closed down 1.25p yesterday at 33.5p.
Meanwhile, it emerged that JJBSports was being investigated by the Serious Organised Crime Agency over possible deception by former employees.
ADVISER FEES
News that ailing retailer JJB Sports is having to cough up six per cent, or £6m, of its £100m rights issue to pay advisers’ fees has reignited a growing row between shareholders and the banks.
There is mounting concern that shareholders are being squeezed by a reduction in competition among banks following the casualties of the financial crisis.
Since mid-2008, when the financial turmoil started to afflict equity markets, fees on rights issues have jumped from two per cent of deal values to an average of five per cent.
The head of the Association of British Insurers Peter Montagnon recently said: “There is a view that the fees are too high and not always fairly allocated between those who take real risk and those who do not.”
Montagnon argues that all firms should justify fees in every case.
But if JJB’s management is to be believed, the rights issue is already heavily over-subscribed – begging the question: why were the fees so hefty?
No doubt Panmure Gordon, Numis and Lazard will argue they are working pretty hard to persuade shareholders to take up shares, especially after a damaging smear was leaked around the markets on the day of the intended fundraising launch.
Ashley Armstrong