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Iconic model train maker faces takeover after failed coup

[LONDON] UK model railway maker Hornby Plc is being bought by a group of investors including its chairman, who this year fought off a shareholder rebellion.

Hornby's biggest shareholder, Phoenix Asset Management, on Wednesday agreed to purchase a 20 per cent stake from activist investor New Pistoia Income Ltd for £5.7 million (S$10 million). That will give it 55 per cent of Hornby's stock, triggering a mandatory offer at the same price of 32.375 pence a share to all other shareholders.

New Pistoia this year failed in an effort to remove Hornby Chairman Roger Canham over what they claimed was the company's "ineffective" strategy. Mr Canham resigned from the board on Wednesday because he's also chairman of Phoenix.

Hornby shares rose as much as 13 per cent to 35.25 pence in London. Phoenix's offer will value the company at about £27.4 million.

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Hornby dates back to 1901, when founder Frank Hornby applied for his first toy design patent. It introduced its first toy train in 1920, and after a period of growth following a brief production shutdown during the Second World War, became publicly traded in 1986.

The Hornby Railway Collectors' Association was established in 1969, producing a monthly journal on Hornby news as well as providing members with auction and repair services.

Hornby said Wednesday that fluctuations in exchange rates since the Brexit vote are impacting earnings, given that it buys supplies in US dollars and sells its products in sterling. It reported a full-year adjusted loss before tax of £6 million in its results statement released prior to the Phoenix takeover announcement.

Phoenix has assets of about £750 million under management. The fund says its investment goals are capital preservation and excellent long-term returns.