Sports Direct (LON:SPD) has become the owner of a sizeable 11 percent stake in fashion retailer French Connection (LON:FCCN), after it was sold to a mystery buyer last week.
Schroders, one of French Connection’s largest shareholders, sold a 9.27 percent stake to Sports Direct through a complex derivative known as a contract for difference, a method that Sports Direct has used before to obtain shares in other companies.
Mike Ashley, CEO of retailer Sports Direct, also bought a further 2 percent worth of shares on the open market, taking his company’s overall stake in French Connection up to 11 percent.
French Connection said in a statement: “We note that Sports Direct has taken long-term significant stakes in a number of British retailers in recent years, and see this investment as a vote of confidence in the true potential of our company. We look forward to working with them more in the future.”
French Connection has faced controversy of late, faced with a trio of activist investors lobbying for a change in the way the business is run. The Telegraph reported last month that the company was looking to replace two of its non-executive directors in order to placate its investors, which include Gatemore and OTK Holding.
The new stakeholder Sports Direct has also been the subject of controversy, after it was accused of having working conditions at its warehouses similar to those of a “Victorian workhouse”. Its shares have sunk significantly since this time last year.
The majority of the business is still controlled by its founder, Stephen Marks, who will decide the future of the company as pressure grows. The retailer reported a pre-tax loss of £7.9 million for the six months to 31 July, with its shares plummeting in value by 57 percent since May 2014.