Mike Ashley’s Sports Direct has increased its stake in French Connection to 27%, taking it close to a level at which it must launch a takeover bid.

Sports Direct has bought out activist investors, including Gatemore Capital Management – a London-based hedge fund that had an 8% stake – and OTK, an investment firm that owned about 7%, to add to an existing 11% stake.

Under takeover rules, a shareholder owning shares worth 30% or more of a company’s stock must launch a formal takeover bid.

Ashley has a long history of building strategic stakes in rival retailers, including Debenhams, online specialist Findel and, most recently, Game Digital. It is not clear what his plans are for French Connection.

It is understood he has met with the fashion chain’s boss and 42% shareholder Stephen Marks in recent months, but not laid out any clear demands.

French Connection said: “Sports Direct is recognising the value that is in French Connection shares. We cannot comment on what their plans are.”

Marks, who founded French Connection in 1972, will be key to deciding the future of the business.

The sale of Gatemore and OTK’s stakes brings to an end a power struggle in which the two investors put Marks under pressure to relinquish his hold on the business he founded.

Liad Meidar, managing partner at Gatemore, has previously called on Marks to run an “open and transparent process to sell the company”.

On Thursday, Meidar said he was pleased with Gatemore’s 44% gain on its investment over the past two years. But he added: “French Connection remains a glaring example of the shortcomings of the UK corporate governance code; namely, that companies can get away with such violations with zero repercussions to the people at the top.”

At this year’s annual shareholder meeting, about 53% of independent shareholders who voted via proxy were against the reappointment of both Marks and the non-executive director Dean Murray. A higher proportion, nearly 56%, voted against the company’s remuneration policy after shareholder groups expressed concern about unclear targets.

Investors aimed to bring about change after five years of losses, which have led to a 52% slump in the value of the FTSE-listed fashion chain since 2014. On Thursday shares closed down 1% at 43p.