Earlier this year, HobbyKing News shared a report about Hobbico shutting its Reno warehouse, which was the company’s primary US East Coast operator (read more here). Shortly after, the extent of their financial woes was revealed as the company filed for bankruptcy in mid-January, to read the full story on this, click here.
In 2005, Hobbico, which is an iconic hobby product distributor, created an agreement in which the employees of the company would receive direct shares in the company. It was known as an employee-stock ownership program. However, as their financial struggles continued, employees were not being reimbursed for their shares, which ultimately lead to the company being under investigation by the U.S Department of Labor. This eventually led to the company filing for bankruptcy earlier in the year.
In the midst of their struggles unfolding, a Hobbico spokesperson said the company remained positive, in hope that they may find a potential new investor or protection from its creditors, saying “we decided to pursue a Chapter 11 reorganization and attempt to attract new capital investment.”
Today, it has been reported that Hobbico may have finally found a buyer, which is US-based company Horizon Hobby. Horizon Hobby, a competing international hobby product distributor, is set to make a bid on several of Hobbico’s assets, when it goes to auction this Wednesday, for a combined value of $18.8 million.
In a statement made by Horizon Hobby President and CEO Joe Ambrose, he said, “We believe this transaction, if completed, will further strengthen Horizon’s position as the market-leader in the RC industry”.
The two companies have similar standing within the hobby industry. Both formed in 1985, Hobbico having 415 employees and Horizon Hobby reportedly having 341 employees are both giant distributors of similar remote control hobby products. Ambrose added “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.”
It is expected that if the agreement is completed, Horizon Hobby will be buying Hobbico’s most iconic brands including Great Planes, Axial, Arrma and Tower Hobbies division. While Horizon Hobby is expecting to pay approximately $18.8 million, Hobbico’s asking price is at least $22 million for these brands. In addition to this Ambrose clarifies that “Horizon will not be assuming any of Hobbico’s debts or other liabilities in this transaction.” The closing date for this sale will be on April 6th.
So what do you think this of this strategic move? What do you think this will mean for the hobby industry?