Why did JAG’s deal collapse?

Why did JAG’s deal collapse?

It was billed as the first steps to take JAG Communications beyond its Cornish homeland and closer to becoming a national retailer.

The collapse of JAG’s 52-store acquisition plan says much about how quickly the dealer market has fallen since the deal was first agreed in January this year.
Sales dried up and JAG proprietor John George reneged on the price, believing he would be overpaying if he continued with the initial terms agreed between him and Go Mobile/Shebang boss Iain Humphrey.

With both parties failing to reach revised terms, the deal collapsed, and the stores were handed back to Humphrey on 11 August.

News spread that the Go Mobile stores’ deal was off, and closures loomed. A list was drawn up of the stores most likely to fall by the wayside, with staff fearing for their jobs.

Fourteen stores are certain to close, with some staff claiming that more will go.
One Go Mobile staffer said: ‘It’s particularly galling because a lot of us joined the company this year and were promised the earth. There was talk of how exciting the JAG deal would be when we were recruited, and the opportunities it would bring. Now we’re pretty screwed.’

‘The stores were not performing’
Negotiations first began in November 2007, with Humphrey looking to offload his retail estate to focus on his fast-developing distribution and fulfilment business, Shebang. Meanwhile, George, a major customer of Shebang, saw an opportunity to pick up some stores. Part of the deal was a commitment that JAG would use Shebang’s distribution business.

Neither Humphrey nor George would reveal the original sale price, but Humphrey said this week: ‘Terms were agreed, it went to solicitors, but before it was finalised, the goal-posts were moved.’

After the initial agreement in January, the deal was supposed to be concluded in April.

George said this week: ‘I wanted to pay a certain amount that Iain was not able to accept. Their stores weren’t performing particularly well and it got to the point where we couldn’t agree on the deal so all the stores went back to him.’

George maintains that a major condition of the initial agreement was the profitability of the Go Mobile stores. He adds: ‘The stores were simply not performing.

‘You have to put value first, and I said, “this isn’t going to work”.’

The new stores would have taken JAG into the north of England, the Midlands and Northern Ireland.

At the same time of the initial agreement with Go Mobile in January, George purchased two Cymru Connection stores in Wales.

George has given his retail store estate a major boost on the back of the Go Mobile deal, lifting it by 50% to around 150 stores when he had one hand on the 52 Go Mobile and Link Telecom stores. Since the collapse of that deal, it has dropped back down to 93 stores.

Go Mobile and JAG’s problems are manifold. The difficulties in the broader economic market appear to have hit hardest outside the big cities, with fuel costs taking their toll, and not enough high earners living and working in those areas.

Big networks have squeezed out the dealers across the country with aggressive direct deals and retention strategies, and have moved into the market towns that JAG or Go Mobile used to operate in, often as the sole mobile retailers.
Both parties are keen to point out that the mess of the collapsed deal hasn’t wrecked the relationship. Humphrey said: ‘It was a try-before-you-buy scenario. I’m not going to get upset with a really important partner. It’s obviously a very difficult time in the market for everyone.’

Potential buyer
Humphrey is now forced back into retail. He claimed that a prospective buyer for a small number of the stores has already approached him, but it certainly isn’t a climate where many companies are looking to buy into retail.

‘I thought I was out of retail but, although it was a surprise, we’ve built up our systems so I’m really looking forward to getting behind the staff and making a success of our stores,’ said Humphrey.

George has allowed Humphrey to keep the JAG branding on the small number of Go Mobile stores that were rebranded.

Humphrey will personally be involved in turning around the stores he is keeping. ‘We’ve got a strong management team at Shebang now, so even though I’ve not been trading in those stores for six months, I can put some effort into getting the retail side into profitability.’

With even the big companies struggling to meet targets, Humphrey couldn’t have picked a tougher time to test his abilities as a retailer.

Written by Mobile Today
Mobile Today


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