Hornby shares soared on Friday after the Scalextric and Airfix owner announced Frasers Group had increased its stake in the company.
Frasers Group has acquired 1,107,575 Hornby shares to take their stake in the group to 8.9%.
Hornby shares have suffered in recent years as it struggles to attract younger generations to its collectibles offering. However, the challenges Hornby faces and the resultant performance of shares have made the company an opportunity too attractive for Frasers Group to overlook.
Hornby shares were 40% higher at the time of writing.
“Frasers has shunted its way up Hornby’s shareholder register, as it pounces on yet another retail name that’s been going through hard times,” said AJ Bell investment director Russ Mould.
“While Hornby’s shares have struggled for years, they’ve recently started to perk up and the appearance of Frasers on the shareholder register has given them another boost.”
Mould continued to explain that investors shouldn’t get ahead of themselves expecting a full takeover approach by Frasers Group.
“Don’t expect Frasers to launch a takeover bid for the group. Its style is to only acquire when something is on the verge of going bust as it prefers to pay pennies to buy something outright. Instead, Frasers is more likely to seek strategic conversations about helping Hornby to improve its distribution and logistics while at the same time realising it might be able to make a few quid by investing in its shares,” Mould said.
“At first glance, it’s not the most logical tie-up for Frasers which is best known for sporting equipment and athleisure. Train sets and tracksuits are about as far removed as you can get. Yet Frasers has shown willingness to explore different ways to get consumers to part with their cash. After all, it went from sporting equipment into sofas and computer games which is not a natural path to take.
“The real connection between Frasers and Hornby is the former’s GAME shops which have progressed from consoles and computer games to now also selling board games, trading cards and toys. Hornby’s products sit on GAME’s shelves and Frasers clearly spots an opportunity to do more.”
