By Kristy Dorsey
French Connection is being sold to a consortium that includes its second-largest shareholder in a deal valuing the business at less than a tenth of its worth when it was at the height of youth fashion in the UK.
The £29 million bid by the consortium that includes 25 per cent shareholder Apinder Singh Ghura will usher in the departure of French Connection chief executive and chairman Stephen Marks, who founded the business in 1972. Mr Marks, who owns 39% of the business, has given irrevocable undertakings to accept the offer which will see him take home approximately £12m.
Though a tiny fraction of its market value in the early 2000s – when the brand was riding high on its provocative FCUK marketing campaign – the cash offer of 30p per share is a 30% premium to its price when news of the bid was first revealed on September 23.
Mr Ghura, described as a “little-known Newcastle businessman”, is acquiring the company through MIP Holdings, which he controls together with Amarjit Singh Grewal and KJR Brothers. Mr Ghura purchased his stake in French Connection at the start of last year from billionaire retail investor Mike Ashley at price of reportedly between £3m and £4m.
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“We are pleased to have reached an agreement with the French Connection directors on this recommended acquisition,” Mr Ghura said in a statement. “We are looking forward to working with French Connection’s management to execute and implement MIP’s strategic plans to facilitate future growth and profitability for the business.”
French Connection put itself up for sale in March after a decade of losses that were exacerbated by the pandemic. In its latest financial year to the end of January it sunk £12m into the red as revenues slumped by 40%, up from a loss of £3m the previous year.
At its peak in 2004 its market value was close to £500m, though it subsequently fell out of favour as it lost steam with its young demographic.
Mr Marks, 75, has been looking to sell his stake for several years. In 2016, reports suggested that French Connection had hired bankers to field approaches from private equity bidders. Two years later, Mr Marks was again reportedly sounding out buyers for his controlling stake.
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Possible offers were floated earlier this year by Gordon Brothers International and Spotlight Brands, and another from Go Global Retail, though no bids were ultimately forthcoming.
Mr Marks said French Connection has made “significant progress” during the last five years with downsizing its store portfolio in a bid to return to profitability. The group currently has 150 stores and concessions globally.
“It was always our intention to look at the most appropriate ownership structure for the business once it was back on track, and having conducted a formal sale process, the French Connection board has concluded that the offer being made by MIP is fair and reasonable,” Mr Marks said.
“When the transaction closes, I will retire from French Connection. This is an appropriate time for me to step back from the business that I founded in 1972, and I would like to take this opportunity to thank all our people for their contribution to our achievements over the years.”
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