US toymaker Hasbro makes new approach to buy Mattel

Citing sources familiar with the matter, the Wall Street Journal and Reuters report that Hasbro Inc. has made an approach to acquire rival Mattel Inc., the latest attempt to combine the two biggest US toymakers in more than two decades.

A merger would create a toy powerhouse, uniting Hasbro’s My Little Pony, Monopoly and Transformers toys with Mattel’s Barbie dolls and Hot Wheels brands. Upon a successful takeover, the combined would have more pricing power to negotiate with entertainment studios over TV and movie franchises.

If the two toy giants reach an agreement, the acquisition would create a toy making behemoth with incredible market clout.

Mattel’s stance toward Hasbro in this overture is not clear, and it remains far from certain that a deal will materialize, the source said, asking not to be identified.

Shares of Mattel advanced 5 percent on Friday, with Hasbro shares rising about 3.3 percent.

Hasbro has a market value of about 11 billion US dollars after a near 18-percent increase in its stock price so far in 2017. Mattel’s shares have slumped 47 percent this year, valuing the company at 4.8 billion US dollars, making it more vulnerable as a takeover target.

The September bankruptcy of Toys “R” Us, the biggest US toy retailer, highlighted the struggles facing the sector, including online competition and children’s shifting preference for electronics over traditional toys.

Mattel has pointed to that bankruptcy as a reason for weak sales.

Two weeks ago, Mattel suspended its dividend and Chief Executive Margo Georgiadis, who took the job in January, warned the company would miss its full-year revenue forecast. Mattel’s stock fell to its lowest level since 2009 that day.

The two toy titans have long been locked in battle for favor among children and adults alike. But Mattel's finances have buckled under weak sales this year.

“Both companies would benefit from a merger, but Mattel stockholders might oppose a deal that values the company on its depressed stock price,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

Hasbro and Mattel have had talks several times over the years, including in 1996 and again sometime in late 2015.

Hasbro, which is trying to diversify its revenue stream, also sought to buy US movie studio and entertainment company Lions Gate Entertainment Corp (LGFa.N) this year, but those talks ended without a deal, Reuters reported in August.

That deal would have given Hasbro a direct pipeline into Hollywood, with more movies and TV shows tied to its toy brands.

In 2014, Hasbro held merger discussions with DreamWorks Animation SKG Inc, the studio behind “Shrek”, but DreamWorks was subsequently bought by Comcast Corp (CMCSA.O).

(REUTERS)