Sports Direct buys stake in French Connection

Last week it was announced that Sports Direct International PLC has bought a stake in clothing retailer French Connection Group PLC.

Following the announcement on 1 February that French Connection’s second-largest shareholder, Schroders, sold its 9.27% stake in the company, it was revealed that Sports Direct had acquired 10.7 million shares, representing an 11.17% stake in French Connection. Sports Direct acquired this stake through a derivative (known as a contract for difference), adding to its track record of strategically purchasing stakes in related companies. French Connection is controlled by founder and chief executive Stephen Marks, who is the largest shareholder in the business, owning 42% of the company. Another retailer, Dunelm founder Will Adderley, owns a 8% stake through his private investment vehicle WA Capital.

Although Sports Direct and French Connection target different customers, Sports Direct’s interest in French Connection complements Sports Direct’s 51% ownership of high-end fashion business Flannels. Flannels currently sells French Connection clothes in its stores and last year paid £108m for an Oxford Street property that will become a Flannels flagship.

It will be interesting to see how French Connection develops now that Sports Direct is involved, and particularly whether Sports Direct will help French Connection turn a profit. A trio of French Connection’s other investors – Gatemore, OTK Holding and Zoar Invest, who together have a 15% stake – have previously called for changes at the company, including improved corporate governance and a recommendation that French Connection’s Oxford Street store be sold. Sports Direct has faced its own share of criticism for its corporate governance arrangements, but perhaps French Connection’s Oxford Street base could find itself in the Flannels flagship store.

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