French Connection reported to be seeking bidders for founder's stake

French Connection has appointed advisers to seek bidders for the 42% stake in the listed fashion business held by its founder and joint chairman and CEO Stephen Marks.

According to Sky News prospective bidders for the stake, including private equity houses and other fashion retailers, have been approached by Numis Securities in the past few days. The business may make an announcement to the Stock Exchange on the commencement of the talks, which may or may not lead to a sale, in the coming week.

If Marks, who founded the business almost 50 years ago, were to sell his stake it could potentially trigger a full take-over offer and that would more than likely as not lead to his retirement from the firm. One figure who is likely to prove highly influential to the outcome of any talks is Sports Direct's Mike Ashley.

Ashley has built up a 27% stake in French Connection as part of his portfolio of strategic investments on the high street. He also owns a near 30% stake in Debenhams, just beneath the percentage that would require him to make a mandatory takeover offer for the whole firm.

Speculation has mounted that Ashley harbours an ambition to merge Debenhams and his newly acquired House of Fraser, however he has been busy trying to stabilise the House of Fraser business since he bought it in a pre-pack deal in August. He has negotiated leases on many of the stores that had been slated for closure under its previous owner Nanjing Cenbest and faced a battle with warehouse operator and logistics supplier XPO over unpaid bills from prior to its administration. The House of Fraser website was closed temporarily as a result but is once again operational.

It is not known whether Ashley would be interested in purchasing Marks' stake in French Connection, which has struggled to remain as relevant as it was during its height of popularity from the mid-90s to mid-00s. It has been consistently loss-making for the past decade, however, in its recent interim results announcement it said it remained on track to move into profitability by the year-end despite making underlying losses before tax of £5.5m in the six months to 31 July.

Should Marks turn the business around it will prove something of a vindication of his insistence that he should not split his role of chairman and chief executive, which goes against corporate governance guidelines. He had faced continuing calls from activist shareholders to do so and to take more radical action to resolve the persistent losses. Eventually disgruntled shareholders Gatemore Capital Management and OTK Holding offloaded their shares enabling Ashley to pick them in July of last year.

In April of this year French Connection sold its Toast business to Danish fashion group Bestseller for £23.3m, however the £11.7m the business made from the sale was mostly eaten up by provisions for onerous retail leases and debt impairment, it revealed in its recent interim statement. French Connection aims to have around 30 full-price retail stores by the end of they year and its current market capitalisation is just over £40m, which is a fraction of what it was worth at its height.