FRENCH CONNECTION PLANS TO BUY $33 MILLION STAKE IN ITS U.S. UNIT
Byline: James Fallon
LONDON — French Connection PLC is taking control of its American destiny.
The hot British brand Tuesday announced plans to acquire the 50 percent of its U.S. business it does not already own for $33 million. The stake is being bought from Best of All Clothing Ltd., which has been French Connection’s American partner for more than 20 years. BoAC is owned and headed by Michael Axelrod.
“Michael decided that since it is our strategy to increasingly have the brand look the same around the world that his role was diminishing slightly,” Stephen Marks, French Connection’s founder, chairman and chief executive, said in a telephone interview. “He felt that if we had a global presence we should have a global management. But it’s totally amicable.”
Axelrod will remain with French Connection for the next six months and will continue to serve as a nonexecutive director of the company after that, Marks said. The U.K. company currently is searching for a new chief executive for its U.S. business to replace Axelrod.
French Connection views the move as a major step in the further development of its brand, which has been one of the most successful in the U.K. over the last three years. The firm has major ambitions for the U.S. market, with plans to open up six more American stores this year and 25 by the year 2004. If completed, the openings would give the company 50 stores throughout the U.S.
“If the potential is as good there as it is here, what should the size of French Connection’s business be in the U.S.?” Marks said. “Surely we should be bigger there than in the U.K.”
French Connection had aftertax profits of $74.9 million on sales of $246.4 million in the year ended Jan. 31, 2000. It will report its fiscal 2001 results next month.
By turning the U.S. operation into a wholly owned subsidiary, French Connection will be able to speed the introduction of products other than apparel, Marks said. It has a global license with Timex and another for home furnishings with WestPoint Stevens. It also has a deal with Boots the Chemists for FCUK women’s and men’s fragrances. It now is the bestselling men’s grooming line in Boots and French Connection is in talks about introducing it in the U.S. Marks expects the line to be in French Connection’s own American stores by Christmas.
BoAC had pretax profits of $8.5 million in the year ended Jan. 31, 2000, and net assets of $25.2 million. Under the terms of the deal, French Connection will pay Axelrod $33 million in cash over 12 quarters. A further $3 million will be payable to Axelrod if there is a change in control of BoAC or a sale of all or most of its assets within 18 months of any termination of Axelrod’s contract with the company. The deal must be approved by French Connection’s shareholders at an extraordinary general meeting.