French Connection Group PLC (LON:FCCN) shares jumped 24% higher on Monday after the fashion retailer unveiled plans to sell its 75% stake in clothing brand Toast Limited to Bestseller United for £23.3mln.
The high street firm said the disposal, subject to shareholder approval, will enable the company to focus further on the French Connection brand in its retail, wholesale and licensing businesses.
READ: French Connection annual loss narrows to £2.3mln despite ‘particularly challenging’ conditions in UK retail
French Connection added it will make £13.9mln in net proceeds from the disposal which it will use for general corporate and working capital purposes and to support the company’s continued turnaround and return to profitability.
Jamie and Jessica Seaton, the founders of Toast, are also selling their 25% stake to Bestseller, which owns the Jack&Jones, Vero Moda and Only clothing brands.
Stephen Marks, chairman and chief executive of French Connection, commented: “The price achieved for Toast reflects the strength of the brand and the business we have built behind it.”
He added:”French Connection will use the transaction proceeds to underpin its core business, allowing us to focus on our priority of returning to sustainable profitability and growth.”
Completion of the disposal is expected to occur by the end of April.
In March, French Connection revealed it narrowed its annual loss before tax to £2.3mln from £5.3mln last year as it closed poor performing stores. The group reported a 0.5% decline in revenue at constant currency to £154.0mln.
French Connection said it might restart dividend payments, once the firm has returned to profitability.
In lunchtime trading, shares in French Connection were 24.4% higher at 53.5p.