LONDON, Feb 2 (Reuters) - British sportswear retailer JD Sports Fashion (JD.L) has approached struggling rival JJB Sports (JJB.L) about a possible takeover offer that would create a business capable of taking on market leader Sports Direct (SPD.L).

JD said it was in "early stage" discussions with JJB's board, while JJB described the talks as "highly preliminary".

Both companies said there was no certainty an offer would be made by JD.

Shares in JJB, which trades from about 250 stores, jumped as much as 45 percent and were up 25 percent at 5.61 pence at 1031 GMT, valuing the business at about 37 million pounds ($58.97 million). Prior to Wednesday the stock had lost 79 percent of its value over the last year.

Shares in JD, which trades as JD Sports, Size?, Bank, Scotts and Chausport from over 500 stores, were down 1.5 percent at 841.5 pence, valuing it at about 400 million pounds.

JJB, in which Bill Gates, the United States' richest man has a 5.5 percent stake, was driven to the brink during the recession, but survived thanks to a deal to sell its fitness clubs to founder Dave Whelan. It also agreed a debt restructuring with creditors, new banking facilities and an equity fundraising.

In December, investors, including Gates, backed a new 31.5 million pounds fundraising to keep the firm alive after dire trading in the run-up to Christmas.

Details of the fundraising were confirmed on Wednesday along with a plan to move from the London's main stock market to junior market AIM.

JJB also updated on trading, revealing sales at stores open over a year slumped 11.1 percent in the five weeks to Jan. 23, while gross margin fell 110 basis points to 24.9 percent.

In contrast, JD traded strongly over the festive period and analysts reckon it is sitting on more than 70 million pounds of cash.

Singer Capital Markets analyst Mark Photiades said getting JJB at an appropriate price might be difficult for JD and would not be without risks given JJB's net debt of about 25 million pounds, cash needed for store refits and trading losses.

"These, together with rationalisation and exceptional costs, perhaps of the order 10-20 million pounds, could mean that the entire exercise could cost between 50-100 million pounds prior to any equity value," he said.

Freddie George, analyst at Seymour Pierce, said JD could afford to buy JJB but highlighted little overlap in store formats, with JD focused on sports fashion and JJB striving to be viewed as a sportswear specialist.

Analysts also noted the potential for competition concerns, given Sports Direct's 11.9 percent stake in JD.

But they said a deal would bring cost synergies and would likely be welcomed by the big sports suppliers, such as Adidas (ADSGn.DE) and Nike (NKE.N), who are keen to see a strong second player in the UK sportswear market to compete with Sports Direct.

(Editing by Kate Holton and Jane Merriman)