Private equity business Rutland Partners is said to be investigating a potential £40m buy-out of underperforming high street chain French Connection.

According to a report in today’s Sunday Times, Rutland (along with retail consultancy Quarto Advisors) began to look in detail at a potential deal for French Connection in January or February of this year when the business’ shares stood at 40p, but it is not known how far it has progressed with its investigation into a deal.

A source is quoted as saying that any deal of more than 40p per share would be difficult to justify based on the current performance of the business. In the year to 31 January losses increased by fivefold to £4.7m and revenue fell 9% to £164.2m

French Connection has come under the microscope lately. Activist shareholder Gatemore Capital Management, which owns an estimated 8% stake in French Connection, has been trying to force change at the business, such as a speeding up of store closures, ditching of the FCUK logo, focusing further on young fashion and refreshing the non-exec board line-up.

Gatemore is also trying to encourage the chain’s founder Stephen Marks to split his chairman and chief executive role, which contravenes corporate governance guidelines. The fund believes the business, which also owns the Toast and YMC brands, has the potential to reach a valuation of as much as 150p. About 10 years ago its shares were worth around £2.40.

For any deal to go through, it would require the support of Marks who founded the business in 1972 and still owns 42% of the shares. He is famously protective of the business and unlikely to give it up easily. He said that trading was beginning to improve when the business posted its numbers in March and, according to the Sunday Times, the company rejected the assertions Gatemore had made while conceding that performance needed to improve.

French Connection enjoyed a heyday in the 1990s when it first introduced the controversial FCUK branding onto clothing and advertising. By the mid-00s the joke had worn thin and the FCUK brand was ditched, however it was revived earlier this year as 90s nostalgia swept through fashion and popular culture.

The business has struggled in recent years to find its place on the high street having been overtaken by fast fashion rivals, such as Zara, at one end and more successful premium brands, such as Reiss and Ted Baker, at the other.