Retailer French Connection shares jump on M&A report

By Noor Zainab Hussain and Esha Vaish

Oct (HKSE: 3366-OL.HK - news) 24 (Reuters) - Shares (Berlin: DI6.BE - news) in fashion retailer French Connection Group Plc rose more than 20 percent on Monday after a media report said overseas investors were looking to buy the British firm that has posted four year of losses.

The Telegraph reported on Sunday that interested buyers were thought to be a mix of European and U.S. private equity firms, as well as investment manager Neuberger Berman, and that French Connection had approached investment bank Moelis & Co for advice. http://bit.ly/2dAzTzy

French Connection (LSE: FCCN.L - news) and Moelis declined to comment. Neuberger Berman did not immediately respond.

French Connection, which has struggled against competition from fast-fashion rivals such as ASOS (LSE: ASC.L - news) , Forever 21 and Inditex (Amsterdam: IT6.AS - news) 's Zara, has failed to post an annual pretax profit since 2011/12 as the success of its once-popular FCUK logo has waned.

Private equity (LSE: 0QLS.L - news) firms could be a natural fit for French Connection as they could push through operational changes to extract profit, and revive the company's brand appeal, said Neil Saunders from retail consultant Conlumino.

The retailer has been the source of takeover speculation in the past, and some sector experts said there was now more pressure on the company following years of underperformance and little sign of underlying issues being addressed, despite turnaround measures including store closures and the hiring of new management and design teams.

Activist investor Gatemore, which has an 8 percent stake, last month urged the retailer to speed up its store closure programme after its first-half results showed another loss.

As of Friday's close of 32.75 pence - a fraction of highs of more than 500p set in 2004 - French Connection had a stock market value of 31.5 million pounds. Founder Stephen Marks held a 41.65 percent stake in the company as of March 15, according to Thomson Reuters (Dusseldorf: TOC.DU - news) data.

British companies have become cheaper for overseas buyers in recent months as Britain's vote to leave the European Union has driven the pound to its lowest in about three decades.

French Connection shares were up 11.5 percent at 36.13p by 0844 GMT. (Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru; Editing by David Holmes)