Sports Direct strengthens holdings in French Connection
Mike Ashley's Sports Direct has strengthened its position in retailer French Connection after two activist investors sold out.
The sportswear group has upped its stake to 27%, building on the 11% slice it secured in February and posing fresh questions about the future of the troubled fashion firm.
Sports Direct has snapped up the shareholding from Gatemore Capital Management and OTK, which held 8% and 7% stakes respectively.
The move adds to the positions Sports Direct has already built up in the likes of Game Digital, Debenhams and Findel.
Gatemore had called for a break-up of French Connection, taking aim at under-fire chairman and chief executive Stephen Marks and calling for him to relinquish his double role.
OTK had added to the chorus of dissenting voices, which demanded a boardroom shake-up and the acceleration of the retailer's store closure programme.
Mr Marks, who launched the business 44 years ago, still holds a 42% stake in the group.
The retailer, best known for its FCUK merchandise, announced in March that pre-tax losses had widened from £3.5 million last year to £5.3 million, while revenue slumped 6.7% to £153.2 million.
Fresh from his High Court victory on Wednesday, Mr Ashley's swoop will fuel speculation that he may launch a full-blown takeover bid for French Connection if he raises his stake to 30%.
Shares in French Connection were down more than 1% on the London Stock Exchange, while Sports Direct rose in excess of 2%.
A spokesman for French Connection said: "Sports Direct is clearly seeing the value inherent in French Connection's shares, however we cannot comment on what Sports Direct's plans are."
Gatemore, which made a 44% return on its investment over two years, said it was not happy with pace of change at French Connection, adding that it had " decided not to ride out the investment" because of the uncertainty surrounding the UK retail industry.
Liad Meidar, Gatemore's chief investment officer , said: "We are pleased with our return on this investment, yet firmly believe that French Connection could have unlocked significantly more value during the period had it made more progress in fixing its corporate governance.
"French Connection remains a glaring example of the shortcomings of the UK Corporate Governance Code; namely, that companies can get away with such violations with zero repercussions to the people at the top.
"We believe that sound corporate governance is the critical component of maintaining efficient and transparent financial markets - for the benefit of not only shareholders, but all stakeholders including creditors and employees."