Sports Direct buys ECI's Evans from pre-pack administration

The development brings to an end a three-year holding for ECI, which acquired the business from Active Private Equity in a deal that Unquote understands was valued at around £75m. The GP was invested in Evans via its £500m ECI 10 fund.

It was widely reported in the UK media at the end of September that Evans was seeking new ownership and a £10m cash injection.

Unquote understands that ECI presented Evans' creditors with an alternative resolution to the company's challenges that would have involved the GP injecting additional capital, which was rejected.

PwC was appointed as administrator for the business in October and the advisory firm's partner Matt Callaghan said in a statement: "2018 has been a very difficult trading year for the business, in part due to the impact of the extended winter weather in the early part of the year and a lack of cash to invest in stores and develop the online platform. A combination of losses, the capital expenditure requirements and tightening credit has led to a liquidity crunch."

Under ECI's tenure, the business pursued a multi-channel expansion approach, while increasing its number of bricks and mortar stores from 56 to 62 and its headcount from around 1,000 to around 1,300. Most recently, it opened a new store in Ipswich in June 2018. However, following the acquisition by Sports Direct, the trade buyer's CEO Mike Ashley said: "In order to save the business, we only believe we will be able to keep 50% of stores open in the future."

According to publicly available documents, Evans' ultimate parent company April Topco generated adjusted EBITDA of £2m in the year ending in October 2017, down from £2.2m year-on-year and from £4m in the five-month period ending in October 2015. During its 2017 financial year, the business restructured loan notes issued by one of its subsidiaries, April Midco, in an effort to improve the capital structure of the group.

In its financial results for the 2017 financial year, Evans highlighted "transactional currency exposure" as one of its key risks. The business sought to mitigate the risks of "unfavourable movements in the exchange rate" by entering into forward contracts with suppliers based on fixed exchange rates.

Evans CEO Andy King left his role in April 2018, having been appointed 17 months earlier.

A spokesperson for ECI declined to comment on the Evans divestment.

Previous funding
Active acquired a majority stake in Evans in 2008, in a deal understood to value the chain at around £35m. During the firm's holding period, Evans' sales quadrupled to reach an estimated £130m, according to a statement issued by Active at the time of its divestment.

ECI then acquired Evans from Active in 2015.

Company
Founded in 1921, Gatwick-headquartered Evans is a bicycle retailer that also sells cycling apparel and accessories. Evans generated a turnover of £138m in the year ending in October 2017, according to the aforementioned documents – up from £136m year-on-year.

People
Sports Direct – Mike Ashley (CEO).

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• Trade sale