In January of this year, French Connection, a popular fashion retailer, turned down a private equity takeover bid from ex-All Saints/USC chief Stephen Craig and two private equity firms. The bid, which could have valued the company at 41.4p per share, offered an 18% premium to the share price at the time. However, the board of French Connection chose not to recommend the bid to shareholders.
This news only recently surfaced due to the expiration of a non-disclosure agreement. French Connection had previously disclosed that it was up for sale, but in January it announced that it was no longer in a formal sale process. The company expressed a desire to focus on its self-generated turnaround strategy, which included right-sizing its store portfolio and increasing its investment in its online presence.
In its most recent financial year ending in January, French Connection reported a loss of £2.9 million. This was a significant decline compared to the previous year, which had seen the company make a profit of £0.8 million. French Connection has been struggling for several years, leading to a decline in its share price. At its peak about 16 years ago, the company’s shares were valued at 487p each, but over the following decade, the value dropped to 74p. In November 2018, the share price briefly reached a high point of 61p before steadily declining. The COVID-19 pandemic dealt another blow to the company’s shares, which are currently trading at just over 5p each. As a result, French Connection’s market capitalisation is now less than £5 million.
French Connection’s decision to reject the takeover bid reflects its confidence in its own ability to navigate the challenging retail landscape and restore profitability. The company is determined to implement its turnaround plans and believes it can weather the storm, despite the significant impact of the coronavirus crisis.