French Connection

LONDON — Mike Ashley’s Sports Direct International has increased its stake in French Connection, after two activist investors sold their shares to the sportswear giant.

The U.K. clothing and sporting goods retailer — which acquired an 11 percent stake in French Connection earlier this year — has upped its holding to 27 percent. Sports Direct bought out disgruntled investors, including Gatemore Capital Management, which had owned about 8 percent, and OTK, an investment firm that had a 7 percent stake. The move brings the company to the brink of launching a takeover bid.

In the U.K., if a shareholder reaches the 30 percent threshold they have to launch a formal takeover offer. A Sports Direct spokesman declined to provide any details about the latest transaction. He confirmed that Sports Direct now holds about 27 percent of French Connection, and said: “We believe this reflects a positive view from Sports Direct about the true value of French Connection’s shares.”

French Connection had no comment.

French Connection’s founder-owner Stephen Marks has been coming under increasing pressure from institutional investors due to the plummeting share price and poor performance of the high-street retailer. The once-flourishing brand has been posting losses for five years and has shut its shop in London’s Oxford Circus.

It has been struggling to compete with the international fast-fashion chains such as Zara and H&M, and to survive in a culture of discounting, too many brick-and-mortar stores and rising rents. Marks has a 42 percent stake in the company, and shareholders have been petitioning him to give up his joint roles as chairman and chief executive officer. They accuse him of neglecting the company and eroding its value.

Sports Direct International has made a specialty out of investing in struggling companies. In April it secured the purchase of the bankrupt U.S. sporting goods firm Eastern Outfitters for a price tag worth at least $30 million, and last year acquired an indirect economic interest in 4.3 million Iconix shares, or 9 percent of the company.

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Ashley has said in the past that “Sports Direct is on course to become the Selfridges” of sports. He has invested more than 300 million pounds in property over the last year and also holds stakes in Findel and Debenhams. Ashley is the owner of the Newcastle United Football Club and has also invested in the flash sales site MySale Group.

The company released its preliminary results last week and reported a group revenue increase of 11.7 percent to 3.25 billion pounds.

“We will continue to invest and make decisions for the long term,” Ashley told shareholders earlier this year. Launched in 1982, Sports Direct operates 661 stores and sells products under its own brands, such as Dunlop, Slazenger and Everlast, as well as merchandise from Adidas, Nike, Reebok, Under Armour and Puma.

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