Frasers Group stock price gains on DW Sports takeover rumours

on Aug 17, 2020
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  • Mike Ashley’s Frasers Group has reportedly placed a £30 million take bid for Dave Whelan’s DW Sports
  • DW Sports, a company that currently owns 73 gyms and 75 stores, went into administration earlier in August
  • Frasers Group stock price gained 2% to continue its bullish run

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Shares of Frasers Group PLC (LON: FRAS) gained 2% on reports that the British retail company has reportedly placed a £30 million take bid for Dave Whelan’s DW Sports.

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Fundamental analysis: Ashley shopping again

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DW Sports, a company that currently owns 73 gyms and 75 stores, went into administration earlier in August, placing more than 1700 staff at stake. This has been seen as an opportunity by Mike Ashley, the owner, and CEO of Frasers Group, to make an offer to the administrator of DW Sports. 

This is not the first time that Ashley made such an offer to companies that are experiencing a crisis. In the past, Ashley has made similar acquisitions including Jack Wills, Evans Cycles, and House of Fraser.

Administrators at BDO have reportedly asked about £20 million, however, there are rumours that Whelan’s family are looking to repurchase the business. The Whelans, who used to own Wigan Athletic, are owners of Fitness First as well, which hasn’t been affected by the breakdown. 

In case Ashley manages to acquire the company, the Frasers Group would take over 880 new stores. Last October, the retailer reported a 14% increase in half-year sales to £2 billion, while the annual reports got delayed as auditors asked for more time. 

At the start of the month, the group was also eyeing to take over 30 stores from its UK rival Debenhams. Mike Ashley showed his interest in acquiring Debenhams but has failed at least two times. 

There have been speculations that the coronavirus pandemic has played a big role in diminishing Ashley’s interest in taking over Debenhams’ stores. 

Technical analysis: Failure at GBX300

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Frasers Group share price jumped 2% on reports that Ashley’s company is looking into buying DW Sports for £30 million. The buyers are now working to secure the third successful bullish close on the weekly chart. 

Frasers Group stock weekly chart (TradingView)

Looking higher, the bulls face strong resistance above. The 100-WMA sits at GBX302, while the 200-WMA is located at GBX328 and both are likely to be the next target for the buyers. On the downside, the 100-period moving average on a daily chart is offering nearby support. 

Summary

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Frasers Group plc, formerly known as Sports Direct, made a £30 million takeover bid to the British retailer DW Sports, which has recently entered administration. Shares of the retailer gained 2% as the buyers aim for a trip north of GBX300.

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