Mike Ashley’s Frasers Group has offloaded its 25% stake in French Connection after the fashion retailer’s share price shot up on news of two takeover approaches.
Frasers sold its 24.1m shares for up to £3.8m on 4 February, when French Connection’s shares surged by more than a third at one point.
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The unusual stock movement forced the company to announce it had received approaches from two interested parties on Friday. Shares in the company then rose by a further 90% that day, so Frasers missed out on about £3.4m in additional gains.
John Stevenson, an analyst at Peel Hunt, said French Connection was another example of where Ashley’s stock market investments had “not gone brilliantly”, with the fashion group’s share price lower than it was five years ago when he first built up the stake.
Frasers, formerly known as Sports Direct, lost £150m when Debenhams went into administration in 2019, while another investment, Goals Soccer Centre, was forced to delist after an accounting scandal.
“With hindsight, I’m sure [Ashley] would have liked to have sold at a higher price but it is not a gamechanger,” Stevenson said. “French Connection fitted quite well with [Frasers] brands but you couldn’t see it being relinquished, so there was nowhere to go.”
French Connection formally sought a buyer in 2019 but the process was not successful, with Ashley and other interested parties not able to secure a deal with Stephen Marks, the founder, chairman and chief executive of French Connection. Marks remains key to its future as he still owns a near-42% stake.
It is thought that one of French Connection’s new suitors has snapped up Frasers’ stake.
French Connection confirmed it had been approached by Spotlight Brands, with backing from the restructuring and investment firm Gordon Brothers. Spotlight has backed British brands including the fitness-focused Sweaty Betty, while Gordon Brothers acquired the Laura Ashley brand last year following its administration.
Spotlight Brands is vying against the brand investment platform Go Global Retail, which is in partnership with HMJ International Services.
Ashley’s retail group had been expected to take control of French Connection after beginning to build a significant stake four years ago.
The retailer, which Marks founded in 1972, also owns the Great Plains brand and operates 68 stores and concessions in the UK as well as many overseas outlets. It employs about 780 staff. The company recorded a £7.3m pre-tax loss in its last annual results, after at least five years of previous losses.
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