According to the latest London Stock Exchange filings, WA Capital acquired a further one million shares in French Connection at 46.5p each on Thursday, 17 March, having purchased 890,162 shares on Tuesday last week. WA Capital now controls 7.1 per cent of the issued share capital. It’s worth flagging up that these are not one-off purchases as the investment vehicle acquired 2.17m shares on Tuesday, 5 January this year, including a block trade at 36p a share, and now owns 6.85m shares in French Connection.
WA Capital was established by Will Adderley to act as a long term holding company for his Dunelm shareholding. It is a UK limited company, and according to the company’s last Annual return Mr Adderley controlled over 83 per cent of the shares in issue. WA Capital holds 25.02 per cent of the issued share capital of Dunelm, and Will Adderley owns a further 5.48 per cent in his own name or through beneficial interests. In total that holding is worth £586m.
Interestingly, Marion Sears, a 54-year old non-executive director of Dunelm and a former JP Morgan investment banker with M&A experience, joined the WA Capital board on Monday last week according to Companies House filings. Frankly, I can’t see any reason for her appointment to the board of WA Capital unless Mr Adderley wants to use her expertise. On the basis that WA Capital has no other listed interests apart from the stake in Dunelm and French Connection, her appointment is intriguing to say the least.
I would point out that 41.7 per cent of the issued share capital of French Connection is owned by Stephen Marks, the company’s 68-year old founder; a further 9.7 per cent is held by Schroders; 8 per cent by Gatemore Capital Management; and 6.2 per cent by OTK holdings. This means that WA Capital is the third largest investor on the share registrar, having only appeared on the radar 10 weeks ago.
Clearly, Mr Adderley sees value in French Connection’s shares. He also has more time on his hands, having stepped down from the role of chief executive of Dunelm to deputy chairman at the end of last year, just before he started his buying spree. The question is whether he has just a passing investment interest in the fortunes of French Connection, or is planning some corporate activity of his own? Either way, significant stakebuilding by a well regarded professional in the retail sector adds the potential for M&A activity here, something that has played a major part in my Bargain Shares portfolios over the years.
Needless to say, I continue to rate French Connection’s shares a buy on a bid-offer spread of 42.5p to 43p especially since the trading update at next month’s annual meeting is likely to make for a good read. Buy.
Please note that I have published four columns today, six so far this week, and 15 since Monday last week, all of which are listed below. I am currently working my way through a large number of results announcements from companies on my watchlist. I will endeavour to update my views as soon as possible.
MORE FROM SIMON THOMPSON...
I have written articles on the following companies recently:
■ Plethora Solutions: Take profits at HK$0.079 ('On the takeover trail', 14 March 2016)
■ Somero Enterprises: Buy at 150p; target 185p ('A solid buy', 15 March 2016)
■ 32Red: Run profits at 150p ('32Red in the money, 15 March 2016)
■ Communisis: Sell at 44p ('Patience running short at Communisis', 15 March 2016)
■ Global Energy Development: Sell at 27p ('Global Energy plays waiting game', 15 March 2016)
■ Raven Russia: Sell at 30p ('Raven Russia battens down the hatches', 15 March 2016)
■ Stadium: Buy at 122p, new target price 150p ('Switch on for bumper gains', 16 March 2016)
■ French Connection: Buy at 42.75p ('Return to profitability looms for chic operator', 16 March 2016)
■ Fairpoint: Run profits at 159p ('Fairpoints to make', 17 March 2016)
■ Netplay TV: Buy at 10p ('Netplay's shares spin higher', 21 March 2016)
■ Satellite Solutions Worldwide: Buy at 5.5p, target 9p to 10p ('Blue sky tech play', 21 March 2016)
■ Miton: Buy at 30.5p, new target 38p (‘Riding earnings upgrades’, 22 March 2016)
■ Inland: Run profits at 86p, new target 95p (‘Valuation surge boosts Inland’, 22 March 2016)
■ Pittards: Crystallise loss at 71p (‘Subdued demand hits Pittards’, 22 March 2016)
■ French Connection: Buy at 43p ('Stakebuilding gathers pace at French Connection', 22 March 2016)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking
