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Home✈️Aircraft🚁HelicopterHelicopter Main Discussion › Horizon Hobby bids to buy Hobbico
03-25-2018 01:45 AM  17 months ago
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R/C Speed Nut

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Galesburg, Michigan USA

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Horizon Hobby bids to buy Hobbico
http://www.news-gazette.com/news/lo...bico-units.html

Mike

Funky Chicken?!!..........I thought this was how you do a piro flip!!
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03-25-2018 02:35 AM  17 months ago
Heli_Splatter

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I am not sure this makes sense buying a company that does almost the same thing you do.
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03-25-2018 02:40 AM  17 months ago
jbjones

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Heli_Splatter...
I am not sure this makes sense buying a company that does almost the same thing you do.
Ummm..yeah, it makes perfect sense, it's called "buying the competition". It's how we got into a lot of messes here in the US, but that is another discussion.
J. B. Jones
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03-25-2018 07:01 AM  17 months ago
wjvail

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Meridian, Mississippi

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Heli_Splatter...
I am not sure this makes sense buying a company that does almost the same thing you do.
I think they will try and buy the most profitable parts at a bankruptcy fire-sale price. Even a company in chapter 11 has elements that make money. My guess is that Horizon is poring over the list below like a child studies a toy catalog at Christmas. They are most likely drooling over a few bits they'd love to have.

Normally I'd say the consolidation of competition is not good for consumers. Because I've been a long time user of OS, Futaba, TopFlite and a few other Hobbico brands, and because I haven't been pleased with their rape-'em-if-you-can marketing, I'm holding out hope that these brands will be better off under the much more modeler friendly Horizon umbrella. I own 4 OS 1.05s. I'd like to be able to say I bought my 5th from the US distributor. That would bring me up to 20%.

It's important to remember that although this is a hobby to you and I, it is a profit and loss business to others. Decisions will not be made on passions. They will be made on numbers.

https://www.hobbico.com/brands.php
"Well, nothing bad can happen now."
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03-25-2018 12:31 PM  17 months ago
Heli_Splatter

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“Perfect Sense”
Maybe at firesale prices but Hobbico wanted 22mil and Horizon offered 18. That is a discount not a fire sale. Horizon is buying duplicate management, sales and distribution facilities. That is dead weight. Most of the product line is similar. Many of the customers buy from both companies already.

Ok the purchase does prevent a new competitor from coming in and forming. The auction will ultimately determine that. It is not a great time to be buying hobby businesses, especially within the US. There is a lot of pricing pressure on customers to buy from China direct. Trump tariffs may change that.

If Horizon knew there was little competition, it would be easier to let Tower fold and buy pieces at fire sale. 18mil is really not that much money. I think it is a “Perfectly Bad” play for Horizon that will burden them with debt and put them at risk. The numbers are not good in my book and they offered too much.

I think the recent purchase of Cabelas is a good example of this. There is a 33mil dollar headquarters facility that will soon be vacant.
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03-25-2018 12:38 PM  17 months ago
870heli

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Monson Ma. USA

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Well if Horizon buys Hobbico and then does the same thing that they have been doing they won't be getting any of my money. Every time I buy something from them it's discontinued.
Spent a lot on Blade heli's of all sizes, never again.
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03-25-2018 02:23 PM  17 months ago
wjvail

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Meridian, Mississippi

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Heli_Splatter...
Maybe at firesale prices but Hobbico wanted 22mil and Horizon offered 18. That is a discount not a fire sale. Horizon is buying duplicate management, sales and distribution facilities. That is dead weight.
The question is not what was asked and what was offered. The question is what is it worth. The devil is in the details. What, exactly, is being bought.

Duplicate management is easy. It's one of those "numbers" business decisions I mentioned earlier. One of the common battle cries in these merger/acquisitions is the increased efficiency that comes from the elimination of duplication. If I were a minion at Hobbico I'd be firing up my resume. Hobbico has played the 100% employee owned card already and I don't know if anyone will come running with their piggy-bank.

Facilities is another question. Some will be required and some will have to be shuttered or sold.

Overriding all of this is that history has shown that the merger of two struggling companies very rarely leads to one healthy one. “The definition of insanity is doing the same thing over and over again, but expecting different results”. I would suggest running Hobbico as it has existed in the past will only lead to the same results. Changes will have to be made.

Watch at YouTube

"Well, nothing bad can happen now."
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03-25-2018 04:32 PM  17 months ago
Heli_Splatter

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870heli...
Well if Horizon buys Hobbico and then does the same thing that they have been doing they won't be getting any of my money. Every time I buy something from them it's discontinued. Spent a lot on Blade heli's of all sizes, never again.
As a practical matter, it is difficult to stock parts and pieces for sub $100 Helis. Very few are willing to repair these toys. That is just the way it is. I gave up on Blade over 10 years ago. Horizon will have to cull the similar items.
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03-25-2018 05:39 PM  17 months ago
spaceman spiff

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Tucson

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I have no idea what the assets of Hobbico are worth, but the debt owed by Hobbico is huge. More than 100 million. Horizon can get the parts of Hobbico they want but they are not stuck with the debt.

http://www.illinoishomepage.net/new...-debt/911249194
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03-25-2018 06:03 PM  17 months ago
TMoore

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Cookeville, TN

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First bid is a stalking horse bid to see what potential buyers are willing to pay for what's left of the company. This is initiated by the bankruptcy court. If you recall a few years ago Horizon had to pool a group of investors together to buy out Horizon. Since Horizon is a private company it's hard to gauge how much their asset to debt ratio is. I would have to pull a D&B report on Horizon to see how bad or good their balance sheet actually is. No one is lighting it up since the hobby has contracted and I'm sure Horizon is feeling the pain too.

The only segment of the hobby that is really going well is RC Cars. One question I have is who else might be interested in owning Tower Hobbies and Great Planes? It can't just be Horizon, there has to be others that will bid for what's left. Hobbico owes over 100,000,000.00, their ESOP is broke and all they really have is some import agreements with certain lines and some real estate. Anyone that buys Hobbico doesn't automatically get representation of product lines. Those products lines will be released from those contracts as soon as the sale is done or even sooner if there are clauses in their contracts especially for non payment.

Here's a direct link to the bankruptcy petition: https://www.csbankruptcyblog.com/wp.../petition-3.pdf
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03-25-2018 09:54 PM  17 months ago
Heli_Splatter

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USA

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Listed debts total around $14.5mil, so adding another mil or so for unlisted would bring unsecured supplier debt to $15.5mil. I think that the largest debt is owed to employee stockholders. I feel bad for them. It does not look like the employees will leave with any retirement money. How did it go so wrong.

Do you trust the running of these ESOP plans?
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03-26-2018 02:16 AM  16 months ago
helitom

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Pine Grove, Calif, USA

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Heli_Splatter...
How did it go so wrong.
What went wrong - my speculation.

What went wrong is usually, in retrospect, easy to see. When Tower started (I'm old enough to remember) they were one of the very first mail order hobby outlets - what they did was sell other people's products. They advertised in back of RCM and eventually, other magazines. At the time, not many modeling people had ever seen such a thing; make a phone call, order stuff, pay with a credit card and a few days later you had your stuff. A great thing, especially if you were use to driving for a couple hours to get to a store which may or may not have what you wanted. Tower grew quickly and that growth was based on being a mail order retail outlet.

Then, the founders (the Holecek (sp) brothers) eventually left to enjoy their fortunes. They left the business to be run by a fellow whose name I cannot remember as I type this. From there Tower was sold to the employees, who had to hire someone to be in charge. No one seemed to understand what was going on in the hobby. They then began re-badging items from whatever the original manufacturer's name was to "Tower". Most of what they re-badged was ah...er crap in the first place so the sales could not have been very good. While doing all of that, they made a corporate decision to move from selling other people's products to buying out manufacturers, doing some modifications to the products(s) and selling them under a Tower (now Hobbico) product name. Manufacturing anything is a costly undertaking what with raw material costs, machinery, more and specialized employees, health care and everything else associated with employees, and on and on and on. But they pressed on looking a only the possible profit margin of selling your own stuff verses selling someone else's products without apparent consideration of what happens when your product does not sell.
Even worse, they began selling Tower/Hobbico products which were in direct competition with other product lines they were already carrying.

In the meantime nobody in charge was smart enough or alert enough to see the hobby business was declining at a rapid rate for a lot of reasons including, customers buying direct from China, old guys like me dropping dead with no one to take our places with toy airplanes, and electronic devices with interconnectivity replacing the thrill of models. If Tower/Hobbico was still simply a retailer selling other people's products it would be very easy to retreat into a smaller operation when the market demanded. When you have a ton of your own stock on the shelves, you're screwed. Maybe that's what you get when the founders transition into a "employee owned" business; the absolute loss of sight of your marketplace coupled with the inability to shrink without huge losses.

When you miss payments to your premier suppliers (Futaba, DLE and on and on) and cannot sell inventory that you own 100%, well, turn out the lights, which is what they are doing.
The older I get, the fewer things seem worth waiting in line for.
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03-26-2018 02:50 AM  16 months ago
Doublah

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USA

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helitom...
What went wrong - my speculation.

What went wrong is usually, in retrospect, easy to see. When Tower started (I'm old enough to remember) they were one of the very first mail order hobby outlets - what they did was sell other people's products. They advertised in back of RCM and eventually, other magazines. At the time, not many modeling people had ever seen such a thing; make a phone call, order stuff, pay with a credit card and a few days later you had your stuff. A great thing, especially if you were use to driving for a couple hours to get to a store which may or may not have what you wanted. Tower grew quickly and that growth was based on being a mail order retail outlet.

Then, the founders (the Holecek (sp) brothers) eventually left to enjoy their fortunes. They left the business to be run by a fellow whose name I cannot remember as I type this. From there Tower was sold to the employees, who had to hire someone to be in charge. No one seemed to understand what was going on in the hobby. They then began re-badging items from whatever the original manufacturer's name was to "Tower". Most of what they re-badged was ah...er crap in the first place so the sales could not have been very good. While doing all of that, they made a corporate decision to move from selling other people's products to buying out manufacturers, doing some modifications to the products(s) and selling them under a Tower (now Hobbico) product name. Manufacturing anything is a costly undertaking what with raw material costs, machinery, more and specialized employees, health care and everything else associated with employees, and on and on and on. But they pressed on looking a only the possible profit margin of selling your own stuff verses selling someone else's products without apparent consideration of what happens when your product does not sell.
Even worse, they began selling Tower/Hobbico products which were in direct competition with other product lines they were already carrying.

In the meantime nobody in charge was smart enough or alert enough to see the hobby business was declining at a rapid rate for a lot of reasons including, customers buying direct from China, old guys like me dropping dead with no one to take our places with toy airplanes, and electronic devices with interconnectivity replacing the thrill of models. If Tower/Hobbico was still simply a retailer selling other people's products it would be very easy to retreat into a smaller operation when the market demanded. When you have a ton of your own stock on the shelves, you're screwed. Maybe that's what you get when the founders transition into a "employee owned" business; the absolute loss of sight of your marketplace coupled with the inability to shrink without huge losses.

When you miss payments to your premier suppliers (Futaba, DLE and on and on) and cannot sell inventory that you own 100%, well, turn out the lights, which is what they are doing.
+1
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03-26-2018 04:18 AM  16 months ago
Gearhead

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Vt

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Most of what they re-badged was ah...er crap in the first place so the sales could not have been very good
when I have seen some of the stuff they sell I have to admit that I did/do wonder why they were stocking it, and too I wondered if people were actually buying it, I guess now you can say they'er not buying it
Jim
Buzz Buzz Buzz
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03-27-2018 06:16 AM  16 months ago
TMoore

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Cookeville, TN

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There are some fine appraisals here of what was happening/is happening but once the sale starts on Wednesday and the smoke clears we'll all begin to see how bad it will really be.

It's hard to say if there was one overriding reason for failure but one thing is for sure; there is a lesson to be learned here for any business.
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AMA SECTION 336 = Gone, replaced by the FAA
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03-27-2018 11:50 AM  16 months ago
Frank Bostwick

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Cincinnati Ohio

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One recurring theme in this thread is “buying direct from China”. That of course is our fault......made in China and bought directly from China are two different things. I’ve beat this drum for years....DONT BUY DIRECTLY FROM CHINA, Doing so does nothing to support this hobby in this country and is very short sighted. Doing so supports China. Buying from a State side supplier supports State side employees, a tax base that pays for police, fire and infrastructure and the very people who make this hobby great.
And only cost us 10% or so. If we continue to buy from mainland China, soon we will only be able to buy from China......this is not about where it’s made, that’s a matter or the rules of capitalism, like gravity we will not side step those laws....this is about supporting companies in your back yard.
Remember, Ron’s, HeliPros, ReadyHeli the list goes on.
Buy from a State side supplier or soon you won’t have the option.
RIP ROMAN
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03-27-2018 12:03 PM  16 months ago
rpat

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Weirton, W. Va.

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I was part of an ESOP(Weirton steel), and when the place filed for bankruptcy the pension part was given to the PBGC and I lost a $1000.00 a month on my pension. ESOPS are an easy way for management to dump a dying company on it's employees that don't have many options in their jobs.trex 700fbl cal30,minititan,, trx600fbl,trex250,logo 500,Velocity N2
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03-27-2018 12:35 PM  16 months ago
Heli_Splatter

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Frank,
With respect why should I pay a 50%-100% markup on an item? If these local/US guys were not gouging so much, it might be different. Maybe it is just that the wage differential with China is so high we (US) cannot compete in the hobby market. Capitalism is about buying from the lowest price distributor. Don’t blame me when LHS infrastructure collapses. It is market conditions, the global economy. Manufacturing is always moving to the cheapest labor source. International jet delivery services makes it all possible. Nobody is watching out for my job, why should I care about yours? It is not easy to solve this problem. Trump’s tariffs are not going to fix systemic pricing problems. At some point wages will have to fall in this country to pull us in line with the world.
Frank Bostwick...
One recurring theme in this thread is “buying direct from China”. That of course is our fault......made in China and bought directly from China are two different things. I’ve beat this drum for years....DONT BUY DIRECTLY FROM CHINA, Doing so does nothing to support this hobby in this country and is very short sighted. Doing so supports China. Buying from a State side supplier supports State side employees, a tax base that pays for police, fire and infrastructure and the very people who make this hobby great.
...
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03-27-2018 12:52 PM  16 months ago
Frank Bostwick

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Cincinnati Ohio

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If they were “ gouging” why are they going out of business at record pace. Know any RC dealer driving around in a Bentley? Though my estimate may be low yours I’m sure is high.....why use state side supplier? See my post above....support people in the hobby, support local business, support your police, fire elms, your country....all worthwhile in my book. Spending your hard earned dollars here is worth it to you in ways that don’t jump off the page at a fellaRIP ROMAN
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03-27-2018 01:34 PM  16 months ago
ssmith512

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Indianapolis, IN USA

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Being a Futaba lifer, I will be interested to see how the US distributorship gets handled.Steve
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