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Märklin families agree to sell company
The families that own German model railroad manufacturer Märklin have agreed to sell the company to investment firm Kingsbridge Capital Ltd. According to the newspaper Stuttgarter Zeitung, the purchase price is approximately 30 million Euro, or $38.5 million, with approximately 13 million Euro to be paid up front.
Approval for the sale was given Thursday by the final three holdouts among the 22 members of the three families that own Märklin. Banks that hold Märklin’s debt had given a May 15 deadline for either a sale of the company to occur or for the company to develop a plan to repay its approximately $70.5 million in loans. Märklin would have had three weeks after the deadline to come up with the plan or declare insolvency. London-based Kingsbridge had expressed interest in purchasing Märklin more than a month ago, and had acquired about $13 million of Märklin’s $70.5 million bank debt. Dr. Ion Florescu, Kingsbridge’s chief financial officer, says Märklin is a name that still has a lot of clout and profitability, despite slumping revenues the last few years. In the past two years, Märklin has reported losses of about $25 million.
“Märklin has about 95% brand awareness in Germany,” he said. “That’s higher than Coca-Cola.” He added the name is known over much of the rest of Europe too, and believes there are a lot of other markets ripe for growth, including North America and Asia. Märklin is represented in the U.S. by its subsidiary, Märklin Inc., of New Berlin, Wis.
To acquire the 147-year-old company, Kingsbridge needed approval by all 22 members of the Maerklin, Safft and Friz families. Nineteen of the family members gave permission initially, and three others held out for several weeks until the banks set a hard deadline. Florescu stated in an April interview that Kingsbridge is “… not thinking of liquidating. We are not a raider of brands or assets.” He also said the investment firm intends to own the company for three to five years, a typical term for investment groups.
Kingsbridge intends to make Märklin profitable again through improved management and marketing, and possibly expansion. In recent decades, Märklin has undergone a several restructuring efforts, cut its workforce and moved much of its production to plants in Sonneberg in the former East Germany, and Hungary, which have lower labor costs than in Göppingen where the company is based.
Approximately 700 people work at the Göppingen plant. The union that represents them, IG Metall, was in favor of the sale, and employees had marched in favor of the sale. Florescu said in April that workforce reductions are not in Kingsbridge’s plans. — Terry Thompson, editor, Model Railroader, and Hal Miller, editor, Model Retailer
05/12/2006
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