Longstanding French Connection shareholder Schroders has offloaded its 9.27% stake in the business to a mystery buyer fuelling takeover speculation.
Schroders has been a long-term backer of the business and was its largest institutional shareholder; it sold its shares for 33p each. As a result of the move shares in the business jumped by 18.6% to 39.75p yesterday, according to The Telegraph.
The move comes after activist shareholder Gatemore Capital Management, with the backing of OTK Holding and Zoar Invest (who together hold 15% of the retailer’s shares) have been applying pressure on CEO Stephen Marks to find a buyer or shake up its boardroom and overhaul its strategy.
Gatemore has repeatedly called for Marks, who holds a 42% stake in the business he founded in 1972, to split his chief executive and chairman role as it contravenes corporate governance guidelines. It has also called for two long-standing non-executive directors (Dean Murray and Claire Kent) to be replaced, a request which the company appears to have heeded, and take urgent steps to address its weakening cash position.
Gatemore has suggested French Connection could run out of cash before the summer unless it takes remedial measures to address the situation, such as selling the leasehold of its Oxford Street flagship store. The Sunday Telegraph reported over the weekend that US activewear giant Under Armour may take over the lease.
French Connection has been loss-making for nine years and despite efforts has not managed to revive its fortunes and return to the success of its 90s heyday. Any buyout deal, particularly a hostile takeover, will be tricky to pull off given the size of Marks’ shareholding but buyers, including private equity houses, have circled the business in the past.
Gatemore is not believed to have been the buyer of the Schroders stake.