Subject:
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LEGO® admits there is the possibility of a takeover
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Newsgroups:
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lugnet.lego
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Followup-To:
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lugnet.general
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Date:
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Sat, 23 Oct 2004 03:16:03 GMT
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Family likely to lose control of the LEGO® set
By Harry Wallop (Telegraph.co.uk)
LEGO is suffering from a severe case of subsidence, an affliction that can
destroy even the sturdiest foundations. The manufacturer of the iconic toy
bricks, loved by generations of children, is in serious financial difficulty,
despite yesterday being voted once again the nation’s favourite toy.
The vote was scant consolation for the Danish company that is on course to lose
up to of Dkr2bn (£186m) this year - even worse than last year’s loss of Dkr1.4bn
(£130m). Kjeld Kirk Kristiansen, the founder’s grandson and chief executive
since 1979 stepped down on Thursday after forecasting the loss. LEGO is now
headed by only the second outsider to the Kristiansen family since it was
founded 72 years ago.
The Kristiansens remain sole shareholders, but a foreign takeover looks an
increasing possibility with none of the fourth generation of the family, all in
their twenties, working for the company.
The new chief executive, 35-year-old Jorgen Vig Knudstorp, admitted he was
daunted by the challenge to keep LEGO independent. “Yes, a takeover is a
possibility. The industry is ready for consolidation but the family don’t think
LEGO should lead it.”
LEGO has blamed its problems on a combination of the weak dollar, supply chain
difficulties and increasing competition, which means that the $50billion global
toy market is declining at 2pc a year.
LEGO manufactures the bulk of its plastic bricks in the high-cost centres of
Denmark and Switzerland, while most toy companies source their goods from the
Far East. Most seriously, Wal-Mart has become the US’s biggest toy retailer,
meaning LEGO has to compete for shelf space against DVD publishers and mobile
phone manufacturers.
Frank Martin is chief executive of Hornby, one of the UK’s largest toy
manufacturers which moved all its production to China between 1997 and 2002. In
stark contrast to LEGO his company has enjoyed a renaissance in the past five
years.
He is not that surprised by LEGO fall from grace. He said: “The concept - brick
construction - is such a pure concept and if you try to sex it up by adding
accessories or tying in with Hollywood movies it jusn’t feel right.” Mr
Knudstorp admits forays into making LEGO computer games, pencils and golf balls
was “silly”. He insists however that children are still interested in playing.
“Blaming the TV or computer is a poor excuse.
A YouGov poll into the top ten favourite toys of the past century published
yesterday voted LEGO as the clear winner, closely followed by computer games and
consoles, teddy bears, Meccano and train sets. The survey was commissioned to
coincide with the launch of an exhibition of the most sought-after toys over the
past century which opens today at the Museum of Childhood in Bethnal Green, east
London. Lego has axed 1,000 of its 8,000-strong workforce and cut of Dkr1.2bn
(£112m) from its cost base this year. It is in talks to move more of its
production to China.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/10/23/cnlego23.xm
-end of report-
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