23rd Feb 2024 12:18
(Alliance News) - Frasers Group PLC is once again demonstrating its opportunistic investment strategy, says one analyst at AJ Bell, as the company boosted its stake in yet another struggling retailer.
On Friday morning, model railway manufacturer Hornby PLC said that Frasers had grown its stake to 8.9%, increasing its shareholding to 15.2 million from 4.1 million.
This is a characteristic move from Frasers, says Russ Mould, investment director at AJ Bell.
"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."
Mould is referencing recent investments by the sporting goods retailer in a number of ailing businesses.
Frasers has gradually increased its stake in the embattled fast-fashion retailer Asos PLC to around 25%.
It also holds just over a 22% stake in rival clothing brand boohoo Group PLC.
These investments have punctuated a number of opportunistic acquisitions. In December, it bought luxury clothes retailer MatchesFashion for GBP52 million and, in January, bought Wit Fitness out of administration.
It could also be a potential bidder for electricals retailer Currys PLC, which it is already invested in. Currys has recently attracted takeover interest from JD.com Inc and private equity firm Elliott.
However, Mould doesn't expect Frasers to launch a takeover bid for Hornby anytime soon.
For starters, Frasers still sits behind Phoenix Asset Management, which holds a 72% stake in Hornby. According to Mould, Phoenix still believes that the developer of Scalextric and Airfix holds "hidden value", and has worked to improve Hornby's website and digital marketing.
Moreover, a takeover of the relatively healthy Hornby is not quite Frasers's "style". Mould says that Frasers would prefer to pay "pennies" for businesses on the verge of going under.
"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."
The move does not demonstrate much obvious business synergy, Frasers being a specialist in sports clothing.
However, Mould adds that the company spots an opportunity to boost sales at its GAME outlets, which have recently begun selling board games and toys, including Hornby's.
The investment is good news for Hornby, which Mould says has struggled to attract younger audiences to its product selection in recent years.
Shares in Hornby were up 34% in London on Friday morning, currently changing hands at 28.10 pence apiece.
Frasers shares were down 0.1% at 831.00 pence each in London on Friday.
By Hugh Cameron, Alliance News reporter
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