Dick's Sporting Goods (DKS, Financials) dropped 14.15% to $179.95 by 12:47 p.m. ET Thursday after unveiling plans to buy Foot Locker (FL, Financials) for $2.4 billion in cash, hoping to boost scale and weather soft demand.

The $24-per-share deal gives Foot Locker an 86% premium over its last close. Shares soared 85% to $23.81, while Dick's stock fell sharply as Wall Street questioned the move.

Foot Locker will stay a standalone brand. It operates in 20 countries and booked $8 billion in sales last year. The merger grows Dick's footprint to over 3,200 stores.

The deal also strengthens Dick's position with major suppliers like Nike (NKE, Financials) at a time when tariffs are squeezing margins.

Foot Locker has faced headwinds from weak mall traffic and a rocky relationship with Nike. But Nike's new CEO, Elliott Hill, is restoring ties with retailers.

Still, TD Cowen's John Kernan called the move a strategic mistake, warning Dick's may need to invest heavily to turn things around.

Dick's will fund the purchase with cash and new debt. The deal is expected to close in the second half of 2025.

This article first appeared on GuruFocus.

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