A group of entrepreneurs – including Lachlan Murdoch, toy entrepreneur Nir Pizmony and Craig Mathieson – have come to the rescue of struggling toy wholesaler Funtastic by agreeing to support a $22 million rights issue to reduce debt and repair the company’s balance sheet.
Funtastic is bracing for a big fall in earnings after booking more than $60 million of writedowns. Many of these relate to the company’s supply agreement with collapsed childcare company ABC Learning Centres.
The company’s chief executive, Tony Oates, resigned yesterday and will be replaced by Stewart Downs, head of the company’s toy division.
But the hopes of the company rest with the rescue plan of Mathieson and Pizmony.
Under the terms of the deal, Mathieson, nephew of Melbourne pub baron Bruce Mathieson, will fully underwrite the $22 million rights issue.
At the same time, Funtastic has agreed to acquire Pizmony’s company NSR Toys for about $7 million in shares and assumed debt.
Mathieson and Pizmony currently hold around 8.49% of Funtastic, but this will increase to around 20% following the rights issue.
Lachlan Murdoch, who owns 13.6% of the company through his investment vehicle Antium, has indicated he will support the rights issue, which would cost him around $3 million.
Pizmony and Mathieson contemplated takeover of Funtastic last year with the support of private equity firm Archer Capital, but this deal eventually fell over.
Pizmony is a former director of Funtastic and sold his previous toy business, JNH Toys, to the company in 2002 for $30 million.