Belfast Telegraph

Phoenix Asset Management to launch mandatory takeover offer for troubled Hornby

Phoenix Asset Management is to launch a mandatory takeover offer for troubled toymaker Hornby after picking up a majority stake in the firm.

The investment fund has agreed to buy 17.6 million Hornby shares for 32.375p from New Pistoia Income, which will give it a 55.2% holding in the company.

This in turn will trigger a mandatory offer for the remaining shares, which will value Hornby at £27.4 million.

Phoenix said that following completion of the offer, it intends to "increase its understanding of Hornby and its longer-term strategy for delivering further earnings growth following the completion of its turnaround strategy, by entering into further discussions with its management and the board of Hornby".

However, Phoenix also said that Hornby will retain its listing on AIM, the London Stock Exchange's junior market, as it allows it to benefit from access to capital and increased profile.

Shares rose almost 5% in afternoon trading to 32.7p as investors welcomed the news.

Hornby also announced that chairman Roger Canham has resigned from the board with immediate effect.

New Pistoia had been pressurising the group to replace Mr Canham, and recently said the company's current strategy is "ineffective", "will continue to destroy value" and is "not aligned with creating wealth for all shareholders".

According to Phoenix's website, it specialises in "buying great businesses when they are cheap usually because they are having short-term issues".

The takeover announcement came after Hornby said that losses narrowed last year as the firm's boss declared his turnaround strategy is on track.

The group reported a pre-tax loss of £9.5 million in the year to March 31, compared with a £13.5 million loss in 2016.

Revenue fell from £55.8 million to £47.4 million as Hornby scaled back on international brands.

Chief executive Steve Cooke said: "Our results to March 2017 provide solid evidence of our delivery in phase one of our turnaround plan; notably in terms of cash-flow performance and gross margin improvement during the year.

"We are determined to build on this progress as we move to the next phase of the turnaround plan.

"The current financial year has started positively and we are well placed to achieve the board's expectations for the year."

The Scalextric-to-Airfix firm, best known for its model railways, has embarked on a painful turnaround which has seen it reduce product ranges and cut back on investment as part of plans to shore up the balance sheet.

Andrew Wade, an analyst at Numis, said: "We continue to expect Hornby to achieve a small profit in 2018 and believe management's focus on prioritising profitability and a right-sized cost base is the right approach."

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