By Yadarisa Shabong

(Reuters) -JD Sports Fashion has proposed to buy American athletic fashion retailer Hibbett Inc for about $1.08 billion, the companies said on Tuesday, as Britain’s biggest sportswear retailer looks to expand across the southeastern U.S.

The deal comes as shares in athletic clothing retailers come under pressure globally after weak outlooks from sports apparel makers such as Nike and Puma.

Last month JD’s U.S. rival Foot Locker also warned on 2024 profits, though Adidas last week hiked its 2024 forecast on strong demand for the German sportswear giant’s sneakers.

“Being part of a larger global retailer like JD Sports gives Hibbett more resources compared to its U.S. peers, Foot Locker and Dick’s,” said Cristina Fernández, analyst with Telsey Advisory Group.

JD Sports will pay $87.50 per Hibbett share in cash, representing a premium of about 20% to the U.S. firm’s last closing price.

Hibbett’s shares were up nearly 19% at $86.17 in U.S. noon trading.

JD’s acquisition of Hibbett, which has about 1,169 stores across 36 U.S. states, will extend its breadth in the country from “coast to coast”, finance chief Dominic Platt said in an analyst call.

It already owns Shoe Palace, which has a big presence on the U.S. west coast, and DTLR, which is established in the east.

“From a competitive standpoint, (the deal) puts incremental pressure on Foot Locker as JD Sports becomes a stronger player in the US,” Fernández wrote in a note.

JD Sports shares, which have fallen more than 20% so far this year, closed up 3.8%.

The enlarged group would have combined revenues of about 4.7 billion pounds in North America, JD Sports said, adding that the region’s contribution to total sales would increase to about 40% from the current 32%.

The deal is expected to add to the British firm’s earnings in the first full year of ownership, with cost savings expected to be at least $25 million, JD said.

The Bury, Greater Manchester-based company said it expects to fund the deal and refinance Hibbett’s existing debt through its U.S. cash resources of $300 million and a $1 billion extension to its existing bank facilities.

($1 = 0.8108 pounds)

(Reporting by Yadarisa Shabong and Savyata Mishra in Bengaluru; Editing by Sherry Jacob-Phillips, Jan Harvey and Shailesh Kuber)

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