Horizon bid for hobbico & upcoming auction

[Fly In My Soup]

 

 

As we are all now aware, horizon recently made a bid for hobbico to the tune of 18.8m, so thought I would post a news thread to keep members updated ..... As hobbico still may go under the hammer at auction this wednesday

 

 

 

From The News-Gazette:
www.news-gazette.com

Photo by: Robin Scholz/The News-Gazette
Cars are reflected in the windows at Hobbico in Champaign on Wednesday, Jan. 10, 2018.

Full article available here: www.news-gazette.com/news/local/2018-03-24/horizon-hobby-agrees-make-188m-bid-hobbico-units.html

 

CHAMPAIGN — Hobby-product distributor Hobbico has found a buyer for its remote-control business: cross-town competitor Horizon Hobby.

Horizon Hobby has agreed to buy several units of Hobbico for a combined $18.8 million, subject to an auction scheduled for Wednesday.

 

"We believe this transaction, if completed, will further strengthen Horizon's position as the market-leader in the RC industry," Horizon Hobby President and CEO Joe Ambrose said in a statement. "Horizon and Hobbico have served many of the same retailers and customers for years. Upon completion of this transaction, Horizon will work to provide a smooth transition within the industry."

Hobbico filed for Chapter 11 bankruptcy protection in January with the goal of finding a buyer.

"Acquiring and incorporating Hobbico's RC business with Horizon allows us to further strengthen our organization so that we are well-positioned to grow and meet the future needs of retailers and customers," Ambrose said. "It is unfortunate that Hobbico's financial position forced it to seek bankruptcy protection, but this transaction will result in a strong organization with the resources to expand and prosper."

 

If completed, Horizon will be buying Hobbico's Great Planes and Tower Hobbies divisions, as well as brands including Axial and Arrma. Hobbico had been asking for at least $22 million for these companies.

 

The purchase won't include Estes, United Model, Revell US or Revell Germany.

Additionally, "Horizon will not be assuming any of Hobbico's debts or other liabilities in this transaction," Ambrose said.

 

Following the auction, where Horizon would be the stalking-horse bidder, the purchase would close April 6.

 

In separate court filings Friday, Hobbico said it had reached a $6 million stalking-horse purchase agreement with a corporation called Estes Industries LLC for its Denver-based Estes subsidiary.

The auction had originally been scheduled for this coming Monday in Chicago and was moved to Wednesday in Delaware.

 

The two-day delay is "just a matter of process efficiency, as there are certain filings that need to take place the day before (Tuesday) in Delaware, and this eliminates travel to Chicago for an auction the following day," said Howard Salazar, human resources director for Hobbico.

He was unable to comment on the purchase agreements.

 

With a stalking-horse bid, the potential purchasers essentially set the floor bid of the auction in exchange for certain protections.

 

For example, if Horizon Hobby isn't the successful bidder, it will receive a break-up fee of 3 percent of its base bid, or $540,000.

 

Both Hobbico and Horizon Hobby are among the top 25 employers in the county, according to the Champaign County Economic Development Corp.

Last year, Hobbico, one of the largest hobby product distributors in the country, said it had 415 employees in the county, and Horizon Hobby reported 341 employees.

Hobbico was formed in 1985, when Clint Atkins combined Don Anderson's Great Planes Model Distributors and Bruce Holecek's Tower Hobbies.

 

Horizon Hobby, founded in 1985 by Rick Stephens, was sold to an investment group in 2014. It has more than 700 employees around the world, including in California, France, Germany, the United Kingdom and China, according to its website.

View full news article

[Kpowell911]

Not sure I like the idea of Horizon owning Tower, but to be honest, Tower have been on the slide for a year or so no. Say goodbye to their epic coupon discount Id imagine!

[tanveer]

I sort of had a feeling that Horizon hobby would get they're mitts on Hobbico...

[J.K]

I thought Tower was 100% owned by its employees?

[Kpowell911]

1 minute ago, James1986 said:

I thought Tower was 100% owned by its employees?

I think thats the reason theyre in this mess due to the profit sharing between employee’s?

[J.K]

2 minutes ago, Guns said:

I think thats the reason theyre in this mess due to the profit sharing between employee’s?

 

Quite possibly, it's just that the article says "Horizon will be buying Hobbico's Great Planes and Tower Hobbies divisions" which says to me that Hobbico had some sort of ownership? I have very little understanding of how Business ownership works, particularly in the US but it just surprised me.

[Oh How Original]

As I said on a recent status, if they win, it'll be either amazing for the hobby, or it will all but kill it in the UK, IMO anyway.

With Losi stock on a major decline and the prices having a major increase, I can't imagine what that would do to Axial, Arrma etc...

Axial spares aren't always that easy to find in the UK as it is, or anywhere for that matter, which is worrying, they used to be everywhere.

Sometimes it feels like fighting a losing battle in this hobby.

[mond]

1 hour ago, James1986 said:

 

Quite possibly, it's just that the article says "Horizon will be buying Hobbico's Great Planes and Tower Hobbies divisions" which says to me that Hobbico had some sort of ownership? I have very little understanding of how Business ownership works, particularly in the US but it just surprised me.

You can have a group i.e. Hobbico with independent entities within them that does profit share at both unit and/group level. I don't know how they can say it's 100% owned by the employees though, even if they all have privately held shares. Hobbico must own the whole thing to sell it or a controlling share and a clause to say they can recall shares for a price from employees. I've seen that in practice before in the UK.

 

Don't know how profit shares would kill a company though, it's usually a bad top management decisions in an evolving market that kills a business. Profit shares are only an issue for those recieving them - at least in the UK it goes through PAYE so you get shafted on tax. Dividends are the way to go.

[Kpowell911]

2 hours ago, Oh How Original said:

As I said on a recent status, if they win, it'll be either amazing for the hobby, or it will all but kill it in the UK, IMO anyway.

With Losi stock on a major decline and the prices having a major increase, I can't imagine what that would do to Axial, Arrma etc...

Axial spares aren't always that easy to find in the UK as it is, or anywhere for that matter, which is worrying, they used to be everywhere.

Sometimes it feels like fighting a losing battle in this hobby.

I for one welcome our Traxxas overlords....

[Kpowell911]

1 hour ago, mond said:

You can have a group i.e. Hobbico with independent entities within them that does profit share at both unit and/group level. I don't know how they can say it's 100% owned by the employees though, even if they all have privately held shares. Hobbico must own the whole thing to sell it or a controlling share and a clause to say they can recall shares for a price from employees. I've seen that in practice before in the UK.

 

Don't know how profit shares would kill a company though, it's usually a bad top management decisions in an evolving market that kills a business. Profit shares are only an issue for those recieving them - at least in the UK it goes through PAYE so you get shafted on tax. Dividends are the way to go.

I read something along the lines of Employees’s were able to bank their profit share yearly,  ready to be drawn on at a certain date. This meant some employees had a substantial payout all at once and when they couldnt pay it they sued  and won?

 

EDIT: Wasnt profit share. It was Stock ownership

Edited March 27, 2018 by Guns

[J.K]

2 hours ago, mond said:

You can have a group i.e. Hobbico with independent entities within them that does profit share at both unit and/group level. I don't know how they can say it's 100% owned by the employees though, even if they all have privately held shares. Hobbico must own the whole thing to sell it or a controlling share and a clause to say they can recall shares for a price from employees. I've seen that in practice before in the UK.

 

Don't know how profit shares would kill a company though, it's usually a bad top management decisions in an evolving market that kills a business. Profit shares are only an issue for those recieving them - at least in the UK it goes through PAYE so you get shafted on tax. Dividends are the way to go.

 

Excellent explanation, cheers Mond  

[babylon]

42 minutes ago, Oh How Original said:

As I said on a recent status, if they win, it'll be either amazing for the hobby, or it will all but kill it in the UK, IMO anyway.

With Losi stock on a major decline and the prices having a major increase, I can't imagine what that would do to Axial, Arrma etc...

Axial spares aren't always that easy to find in the UK as it is, or anywhere for that matter, which is worrying, they used to be everywhere.

Sometimes it feels like fighting a losing battle in this hobby.

It will never die here or anywhere, You have to remember that this hobby is really pretty small no matter what country you are in, Some people try RC cars, Don't get on and drop out, Others like us try it and stay, Look at it this way, Horizon  have, Or will make a bid of $18.8 Million , Just over 13 million quid, And from reading around, Even Traxxas, The so called biggest of them all  has a turn over not a great deal more than that, The same sort of money some companies spend on printer ink refills.

 In other words, In this day and age, Both Horizon and Traxxas are very small business fish .

[Oh How Original]

50 minutes ago, babylon said:

It will never die here or anywhere, You have to remember that this hobby is really pretty small no matter what country you are in, Some people try RC cars, Don't get on and drop out, Others like us try it and stay, Look at it this way, Horizon  have, Or will make a bid of $18.8 Million , Just over 13 million quid, And from reading around, Even Traxxas, The so called biggest of them all  has a turn over not a great deal more than that, The same sort of money some companies spend on printer ink refills.

 In other words, In this day and age, Both Horizon and Traxxas are very small business fish .

 

I don't know why how much those companies have is relevant at all to what I said.

Losi have already pulled a lot of stuff from the UK and what remains has gone up by 50%!

If that happens with all the companies they are trying to buy, it's not good for the hobby, it might not quite end it, but it will be a bloody shame for us who use Axials for example, stuff is already difficult to get.

On the flip side, Horizon could see that as a way to get back into the UK/EU markets, which would be fantastic, but it's extremely unlikely.

[mond]

4 hours ago, babylon said:

It will never die here or anywhere, You have to remember that this hobby is really pretty small no matter what country you are in, Some people try RC cars, Don't get on and drop out, Others like us try it and stay, Look at it this way, Horizon  have, Or will make a bid of $18.8 Million , Just over 13 million quid, And from reading around, Even Traxxas, The so called biggest of them all  has a turn over not a great deal more than that, The same sort of money some companies spend on printer ink refills.

 In other words, In this day and age, Both Horizon and Traxxas are very small business fish .

What do they get for that 18 million? Hobbico as a group turned over nearly $300 million last year.  To give an idea, Tamiya Inc turns over $100 million a year. 

 

Traxxas is a one trick pony in terms of product, Hobbico owns all sorts of hobby companies. They may just be selling specific subsidiaries. I can't imagine Tower is worth anything without Hobbicos distribution behind it, which I think is Revell.

[Fly In My Soup]

7 hours ago, Guns said:

EDIT: Wasnt profit share. It was Stock ownership

Edited 6 hours ago by Guns

 

Correct, there was a Employee stock ownership plan in place, which was a majority employee owned one.....problem with the ESOP is the amount of shares allocated are often based on pay grade not just time served...and voting rights are only retained by certain shareholders...so execs end up with most control.

 

2 hours ago, mond said:

What do they get for that 18 million?

 

A shedload of exclusive distribution rights !!! Including hpi racing for north America, futaba for entire USA, thunder tiger, Novak, o.s engines and loads more....I think that's where the core value lies, as those companies themselves are still trading ok.

 

 

[mond]

That may not be good for Futaba. 

[babylon]

Look,Manufacturers come and manufactures go,  I don't enjoy this hobby anymore now than I did 30 odd years ago, It was fun then, It's fun now, And it will be fun in the future.

[Fly In My Soup]

3 hours ago, mond said:

That may not be good for Futaba. 

 

Lmao, true true...at the very least this will of been an unsettling time for all companies using hobbico as an exclusive distributor, although I'm assuming that with futabas diverse portfolio and massive revenue this may not trouble them too much....

 

 

Auction for hobbico due to take place today

 

 

[J.K]

I'm ever the optimist, but if Horizon succeed then could we find ourselves with new releases combining Losi quality with Arrma design?.....What a treat that could be - hurry up and buy 'em out already!

[Oh How Original]

1 hour ago, James1986 said:

I'm ever the optimist, but if Horizon succeed then could we find ourselves with new releases combining Losi quality with Arrma design?.....What a treat that could be - hurry up and buy 'em out already!

 

Now that certainly sounds good!

Provided it's not Losi UK prices lol.

[Kpowell911]

9 minutes ago, Oh How Original said:

 

Now that certainly sounds good!

Provided it's not Losi UK prices lol.

This is the problem. Losi arent ‘quality’ any more. They’re admittedly still ‘up there’, but their quality has dropped off considerably over the last decade or so

[Oh How Original]

28 minutes ago, Guns said:

This is the problem. Losi arent ‘quality’ any more. They’re admittedly still ‘up there’, but their quality has dropped off considerably over the last decade or so

 

Based on what?

I've owned many many different Losi vehicles, of all different scales and I've never had one I'd call weak yet.

I think the two issues with Losi are spares aren't always easy to get and they are often quite pricey.

That being said, of all the ones I've owned, very few ever need spares anyway, so it's not a huge problem, I've never had to question the durability of one yet.

IMO, Losi still rank as one of the very strongest, whether it's a kit or RTR

Which ones have you personally found to be weak?

I'm really interested to know which ones you'd compare as stronger a decade ago, compared to know.

I never owned any that long ago, so you've piqued my curiosity.

[superduke]

17 minutes ago, Guns said:

This is the problem. Losi arent ‘quality’ any more. They’re admittedly still ‘up there’, but their quality has dropped off considerably over the last decade or so

I disagree.. my losi 8-e 3.0 has been brilliant, one of my favourite rc's, i brought the rtr version & apart from the plastic shock caps & thin shock towers (ive since put the tlr replacements on)its been superb, on a scale of 1-10 id give it a 9 & my mt410 9.5 ,its damn near as tough as the tekno. 

 

I hope horizon do buy hobbico id class losi & arrma the 2 best rtr companies.

 

I dont know why people keep moaning about spares being a problem for losi's ,,,ive just rebuilt the losi 8 over the winter spent over £160 in new parts ,every part i needed wheelspin had them in stock 4-5 days after ordering them.

 

 

[PraetoR]

39 minutes ago, Guns said:

This is the problem. Losi arent ‘quality’ any more. They’re admittedly still ‘up there’, but their quality has dropped off considerably over the last decade or so

 

Yeah... that's nonsense.

[Kpowell911]

20 minutes ago, superduke said:

I disagree.. my losi 8-e 3.0 has been brilliant, one of my favourite rc's, i brought the rtr version & apart from the plastic shock caps & thin shock towers (ive since put the tlr replacements on)its been superb, on a scale of 1-10 id give it a 9 & my mt410 9.5 ,its damn near as tough as the tekno. 

 

I hope horizon do buy hobbico id class losi & arrma the 2 best rtr companies.

 

I dont know why people keep moaning about spares being a problem for losi's ,,,ive just rebuilt the losi 8 over the winter spent over £160 in new parts ,every part i needed wheelspin had them in stock 4-5 days after ordering them.

 

 

 

You guys don't think there has been a clear decrease in quality since them splitting TLR and Losi? I'm not talking about the 8ight. The 8ight is quality, but thats TLR not Losi. The DBXL is a rebrand for gods sake, you don't expect a company with their reputation to be doing that. My last Losi car was a SCBE, it was awful and broke if you looked at it the wrong way... This thing:

http://www.losi.com/Products/Default.aspx?ProdID=LOS03007T1

Twice I broke that within 2 minutes of the charged lipo on the 2 occasions, before I got the expensive spare parts (admittedly off the shelf in Wheelspin) and sold it.

I understand Losi are the golden boy on here, and maybe im reminiscing about the good old says for my XXX-S Touring cars, but things like the Losi SCBe/SCTE/XXLe are now considerably worse than Losi products of 5-10 years ago.

 

They even have 2 different websites now:

The high quality stuff
http://www.tlracing.com/ 

The rest

http://www.losi.com/

Edited March 28, 2018 by Guns