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| Sports Direct buys French Connection stake as battle looms | |
| (35 minutes later) | |
| Mike Ashley’s Sports Direct has taken control over an 11% stake in French Connection, setting up a potential power struggle over the future of the ailing fashion chain. | Mike Ashley’s Sports Direct has taken control over an 11% stake in French Connection, setting up a potential power struggle over the future of the ailing fashion chain. |
| The 10.7m shares, controlled via a complex form of derivative known as a contract for difference, would give Sports Direct the power to disrupt any takeover bid for the retail group. | The 10.7m shares, controlled via a complex form of derivative known as a contract for difference, would give Sports Direct the power to disrupt any takeover bid for the retail group. |
| It is not clear whether Sports Direct, which has a history of taking strategic stakes in related companies including Debenhams, JD Sports and the online specialist Findel, is interested in making a bid itself. | |
| French Connection is under pressure to make acquisitions to meet its growth targets and some industry insiders believe it would fit well with Sports Direct’s fast-growing Flannels fashion business. | |
| But Stephen Marks, who founded the business in 1972, still owns a near 42% stake and will be key to deciding the future of the business. | But Stephen Marks, who founded the business in 1972, still owns a near 42% stake and will be key to deciding the future of the business. |
| Marks is currently fighting off pressure from an activist shareholder to surrender his dual role as chairman and chief executive as the business continues to nurse heavy losses. | Marks is currently fighting off pressure from an activist shareholder to surrender his dual role as chairman and chief executive as the business continues to nurse heavy losses. |
| Gatemore Capital Management, a US hedge fund that has built an 8% stake, has joined forces with other investors OTK and Zoar Invest to control 15% of French Connection shares. | Gatemore Capital Management, a US hedge fund that has built an 8% stake, has joined forces with other investors OTK and Zoar Invest to control 15% of French Connection shares. |
| The retailer is in its fifth loss-making year and Liad Meidar, a managing partner at Gatemore, said it was time to “rip off the Band-Aid”. | The retailer is in its fifth loss-making year and Liad Meidar, a managing partner at Gatemore, said it was time to “rip off the Band-Aid”. |
| He accused Marks of overseeing a “tremendous decline in value”. The retailer reported a pre-tax loss of £7.9m for the six months to 31 July and its shares have plummeted in value by 57% since May 2014. |