Hobbico files for bankruptcy, possibly selling company

WoodiE

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Well this is certainly something you don't like hearing, but Hobbico is filing for Chapter 11 Bankruptcy.

Hobbico distributes over 150 brands and 30 proprietary brands that include Arrma, Axial, Flyzon, Futaba, Great Planes, Dynamite, and many more.

Hobbico announced today that we are filing for restructuring under Chapter 11 of the Bankruptcy Code and that we are pursuing a process to sell or restructure the company. It’s important to know Hobbico will continue to operate the business throughout the bankruptcy process. Numerous companies across a range of industries (automotive, airlines, etc.) use this type of filing as a tool to get costs under control, create stability and build platforms for growth.

Hobbico intends to use the bankruptcy filing and a possible sale of the business to reduce our debt, restructure our liabilities, attract new investors and position the company for future growth. We carefully evaluated this vs. a number of other actions and concluded this was the best path forward.

I understand that this may be difficult news to hear. Hobbico is one of the largest U.S. distributors of radio-control and general hobby products and our business has many strengths. At the same time, Hobbico has faced and continues to face many significant challenges.
 

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More updates...
http://www.news-gazette.com/news/local/2018-03-31/horizon-the-sole-bidder-hobbicos-rc-business.html

Home » News » Local

Horizon the sole bidder for Hobbico's RC business
Sat, 03/31/2018 - 7:00am | Ben Zigterman

CHAMPAIGN — Horizon Hobby was the top bidder this week for Hobbico's remote-control business, agreeing to buy the hobby-product distributor for $18.8 million.

Horizon had reached an agreement last week to buy Hobbico's RC business for that amount and was apparently the only bidder.

Hobbico, which filed for Chapter 11 bankruptcy protection in January with the goal of finding a buyer, held an auction Wednesday in Delaware.

The agreement with Horizon includes the purchase of Hobbico's Great Planes and Tower Hobbies divisions, as well as its brands including Axial and Arrma.

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

Separately, a corporation called Estes Industries LLC was the successful bidder for Hobbico's Colorado-based Estes subsidiary with a purchase price of $7 million, up from the $6 million agreement that had previously been reached.

Estes Industries was alternatively identified as The Langford Group in a transcript of the auction, which consisted of a single round of sealed bids.

The remaining units of Hobbico are still up for auction, but that process is temporarily on hold, according to the transcript.

"We received a number of bids that overlap and contained other terms that we need to discuss with the consultation parties," said Nick Miller, who is representing Hobbico. "So we are adjourning the auction with respect to the remainder until sometime in the near future."

The successful bids still need to be approved Monday at a bankruptcy court hearing, and there's already been one objection filed to the Horizon Hobby deal.

A group of unsecured creditors question the Horizon Hobby deal because one of its board members — Rusty Freeland — also works for a law firm that has represented Hobbico.

Freeland is a member of Armory Capital, a Champaign-based investment firm that was one of the buyers of Horizon Hobby in 2013, and also an attorney with and shareholder of the Meyer Capel law firm in Champaign.

Horizon Hobby disclosed Freeland's connection on March 23, when its stalking-horse bid for Hobbico was announced.

Freeland said he spends the vast majority of his time working for Armory, hasn't disclosed any information about the Hobbico sale process to Meyer Capel and hasn't received any confidential information from Meyer Capel about Hobbico.

"To the best of my knowledge, I have not worked on any matters for Hobbico while I have been a shareholder of Meyer Capel for over 20 years," Freeland wrote in court documents.

Nonetheless, the group filing the objection says Horizon should have disclosed the connection sooner.

"This lack of disclosure created, at the very least, the perception of collusion and an unfair advantage to Horizon as a potential purchaser," wrote Katherine Good, the group's lawyer. "Such a perception, in turn, potentially chilled bidding, resulting in no competing bids."

Because there were no other bids, the group also questioned whether the auction succeeded in attracting a high-enough sale price.

Hobbico had been asking for at least $22 million for the units Horizon wants to buy.

"It is unclear whether Horizon's purchase price...constitutes 75% of the appraised value of the assets, which serves as a general benchmark for what is 'fair and valuable consideration,'" Good wrote. "Horizon's final bid is only 85% of the minimum bid."

Freeland, Hobbico and Horizon could not be reached for comment Friday afternoon.

In a filing late Friday, a lawyer for Hobbico pushed back on the allegations.

"The marketing of the Debtors' assets was thorough, the Auction held on March 28 was fair, and all negotiations between the Debtors and Horizon were conduction at arms' length and in good faith," Matthew Talmo wrote. "There was no fraud, collusion or chilling of bids."

Hobbico and Horizon Hobby were both formed in 1985, and are among the top 25 largest employers in Champaign County, according to the Champaign County Economic Development Corp.

Last year, Hobbico said it employs 415 people in the county, and Horizon Hobby reported 341 employees.
 

WoodiE

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Well the Judge has OK'ed the purchase of Hobbico by Horizon!

CHAMPAIGN — A bankruptcy court judge approved Horizon Hobby's $18.8 million purchase of Hobbico's remote-control business Monday, which means Hobbico employees must reapply for their jobs at Horizon before the purchase is completed Friday.

Hobbico's more than 300 employees were made aware of this possibility last week, after Horizon was the lone bidder in a bankruptcy auction for Hobbico, which filed for Chapter 11 protection in January with the goal of finding a new buyer.

"As mentioned in yesterday's Town Hall Meetings, Hobbico employees who are interested in being considered to work at Horizon Hobby are required to apply online," Hobbico human resources manager Megan Huppert wrote Friday in an email obtained by The News-Gazette.

It's not clear how many of the employees will be hired at Horizon, especially since the two Champaign-based hobby-product distributors perform similar tasks.

"Horizon and Hobbico have served many of the same retailers and customers for years," Horizon CEO Joe Ambrose said when his company announced it would try to buy Hobbico's RC units.

Horizon is buying Hobbico's Great Planes and Tower Hobbies divisions, along with its Axial and Arrma brands.

Also on Monday, a bankruptcy judge approved a separate $7 million sale of Hobbico's Colorado-based model-rocket subsidiary, Estes, to an organization called The Langford Group.

An auction for Hobbico's remaining assets — including United Model, Revell US and Revell Germany — was temporarily suspended last week.

Hobbico employees will be applying for jobs in departments at Horizon rather than specific positions, and a temp agency is helping Horizon process the applications.

"Due to time constraints with hiring/reviewing/interviewing 300+ employees, Express Employment is assisting Horizon with the recruitment process," Huppert wrote. "Employees who are selected to work in the Distribution Center could start on Saturday, April 7th through Express Employment."

If employees apply by Friday, their seniority with Hobbico will be used to determine when they're eligible for benefits.

However, "If you apply after the close of the transaction (April 6th), you would be considered a new applicant and treated like any other external candidate," according to a document attached to Huppert's email.


"We will review the applications and get in touch with candidates with whom we are interested in moving forward," the document said, later saying: "We plan to interview as many people as we can, but given the short time frame prior to closing, we will not likely be able to interview everyone."

A representative for Hobbico could not be reached for comment Monday, and a representative for Horizon said the company would issue a statement after the sale closes.

The two companies were both formed in 1985 and are among the top 25 employers in the county, according to the Champaign County Economic Development Corp.

Last year, Hobbico said it employs 415 people in the county, and Horizon Hobby reported 341 employees.

source: http://www.news-gazette.com/news/lo...s-horizons-purchase-hobbicos-rc-business.html
 
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