October 8, 2018 / 8:30 AM / in 11 days

Shares in French Connection surge on prospect of sale

(Reuters) - French Connection (FCCN.L) shares rose as much 45 percent on Monday after the British fashion retailer said the company could be sold as it reviews its strategic options.

FILE PHOTO: A person walks past a French Connection store in London, Britain, 14 March, 2016. REUTERS/Hannah McKay/File Photo

The statement follows a weekend report from Sky News that Chief Executive Officer and Chairman Stephen Marks, who founded the company in 1969 and remains the largest shareholder, had approached bidders to offload his stake.

Marks retains a 41.6 percent stake, according to Refinitiv Eikon data while Mike Ashley’s Sports Direct International (SPD.L) holds 27 percent.

French Connection shares were up 34 percent at 57.5 pence at 0800 GMT, giving the company a valuation of around 55 million pounds ($72 million).

The company, whose brands include its namesake French Connection, Great Plains and YMC, has struggled to differentiate itself from rivals such as Inditex’s (ITX.MC) Zara, which offers a greater variety of clothes at cheaper prices.

French Connection sold goods from 328 branded locations as of the end of January — a mixture of its own stores, spaces in concessions and licensed and franchised premises.

Once known for its provocative FCUK brand of clothes and accessories, the company has been in the red for six years. In March, it said that it was close to turning profitable, adding that it would consider restarting dividend payments when it did.

Last year, the company came under pressure from activist investor Gatemore Capital Management to explore a sale, replace board members and split the role of the CEO and chairman.

In a bid to narrow losses and move towards profitability, the company has pushed through a string of changes including closing stores. It has also hired fresh talent in its management and design teams to compete with the likes of Ted Baker (TED.L), Asos (ASOS.L), Zara and Top Shop.

The company’s stock price is a far cry from the heady days of 2004, when it traded at more than 500 pence.

In April, the company agreed to sell its 75 percent stake in clothing brand Toast to Danish firm Bestseller United A/S for 23.3 million pounds.

($1 = 0.7656 pounds)

Reporting by Sangameswaran S and Shashwat Awasthi in Bengaluru; Editing by Bernard Orr/Keith Weir

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