The future of Blacks Leisure was looking increasingly grim on Friday as Sports Direct withdrew its offer for the retail chain.

Although Sports Direct is already a major stakeholder in the group, the potential deal has vanished within days of it being broached on 13 December and could push Blacks into receivership.

'After careful consideration, notwithstanding that Sports Direct remains a committed and supportive shareholder of Blacks Leisure, Sports Direct has decided not to proceed with an offer,' the company announced in a statement.

The news pushed Blacks shares down more than 26 per cent in initial trading while shares in Sports Direct climbed 6.5 per cent.

Blacks put itself up for sale on 7 December after a terrible year in which profit warnings had driven its share price down almost 90 per cent.

As at 5 December 2011, the group's net bank debt was approximately £36 million. It said it continues to be in constructive discussions with its lender, Bank of Scotland, which is supportive of the proposed sale process, which the directors are seeking to conclude during January.

'Given the current level of debt within the group, there can be no assurance that any sale would attribute value to the ordinary shares of the group,' a company statement warned.

In October, the company posted pre-tax losses of £16 million, widening from £7.2 million the year before as sales slumped and margins were slashed.

This was written for our sister website, Interactive Investor