Hornby surges as Frasers Group bumps stake up to 8.9%

Frasers - which also owns stakes in Boohoo, Asos, Currys and AO World, among others - bought just over 11.1m shares in the company, taking its total holdings to just under 15.2m.

Frasers chief financial officer Chris Wootton said: "Frasers Group has a vision to build the planet's most admired and compelling brand ecosystem. Hornby's portfolio of unique heritage brands is already part of GAME's product offer and we look forward to exploring opportunities to further leverage our scale in retail logistics and distribution.

"This is consistent with our strategy of pursuing strategic interests to enhance value for all stakeholders."

Hornby chief executive Olly Raeburn said: "Frasers Group has built a powerful ecosystem through its brand partners, scaled shared services, and distribution channels. We have long admired their approach to merchandising and logistics and welcome them as a supportive shareholder.

"We look forward to exploring commercial opportunities in working together to unlock the full potential of Hornby's much loved brands."

At 0910 GMT, Hornby shares were up 38% at 29p.

Russ Mould, investment director at AJ Bell, said: "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.

"Phoenix Asset Management already owns 71.6% of the business and is helping Hornby through its Castelnau investment vehicle. Phoenix sees hidden value in the model trains-to-planes specialist and has used two businesses owned by Castelnau to make improvements to Hornby’s websites and digital marketing. Part of the strategy is for Hornby to develop direct relationships with existing and potential customers and to give greater individuality to its brands which include Scalextric and Airfix.

"These brands are well known to the older generation but Hornby has struggled to resonate with a younger audience, partially because its marketing has been ineffective and previous restructuring efforts have flopped. Profit warnings have been more regular than the number 8 bus to London Victoria.

"With such few shares freely traded on the market, Frasers will have only been able to get a block of 11.1 million shares from Phoenix or Artemis, the only other large shareholder on the register.

"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.

"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.

"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."