- Toymakers have been in on-and-off-again deal discussions
- Deal would bring together owners of Barbie, G.I. Joe brands
Mattel Inc. and Hasbro Inc. have held talks about merging two of the world’s biggest toy companies, according to people familiar with the matter, in a deal that would bring together the manufacturer of Hot Wheels with the maker of My Little Pony.
Hasbro approached Mattel about a potential transaction late last year, and the companies have held on-and-off-again talks about a deal, the people said, asking not to be identified as the situation isn’t public. Details of how a transaction might be structured couldn’t immediately be learned. The talks may not lead to a deal, the people said.
Representatives for Hasbro and Mattel declined to comment.
Mattel shares rose 1.7 percent to $32.29 at 4:26 p.m. in New York, valuing the company at about $11 billion and extending a streak that has seen the stock gain 19 percent this year. Hasbro rose 1.3 percent to $75.96 after climbing as high as $78.45, valuing the company at about $9.5 billion.
Mattel Chief Executive Officer Chris Sinclair is leading a charge to revive the El Segundo, California-based company’s Barbie business, after losing market share in recent years to Europe’s biggest toymaker, Lego A/S, as well as Hasbro’s reinvigorated My Little Pony brand. Shares surged the most in almost seven years Tuesday after holiday results topped analysts’ estimates, even as gross sales fell.
Hasbro is scheduled to report full-year earnings on Feb. 8, with revenue forecast to increase to about $4.4 billion from $4.3 billion in 2014, according to the average estimate of 12 analysts, compiled by Bloomberg. The Pawtucket, Rhode Island-based company holds the toy license for “Star Wars: The Force Awakens” -- a hit in theaters over the holiday season -- and said in October that sales were off to a “strong start.”
Revenue at Mattel is set to take another hit this year as the licensing rights to Disney’s lucrative Frozen and Princess brands shift to Hasbro. Last week, the company unveiled Barbie dolls with a wider array of options, including shorter and “curvier” versions, in a bid to boost the brand’s appeal.
This is not the first time a combination has been talked about. Two decades ago -- almost to the day -- Mattel withdrew a $5.2 billion offer for Hasbro, citing an “intolerable climate” created by its competitor’s use of the media and politicians to fight the proposed takeover. Back then, Hasbro resisted the deal in what Mattel described as a “scorched earth” campaign to stop it.
Should a deal succeed this time around, it would bring together Mattel’s strength in the girls category and Hasbro’s dominance over the boys’ toy aisle, while making the combined company a stronger competitor to Denmark’s Lego, which has been growing faster than either of its U.S. rivals.
A merger might not face disqualifying antitrust hurdles because the U.S. toy industry is very fragmented, according to Jaime Katz, an analyst at Morningstar Inc. If combined, the companies would have probably about one-quarter of the market in the U.S., she said.
Other experts said the antitrust review would probably hinge on how broadly officials define the market. A review that looks more narrowly at the companies’ overlaps in specific toy categories could probably win approval contingent on the sale of some product lines, said Jonathan Kanter, an antitrust lawyer at Cadwalader, Wickersham & Taft LLP in Washington.
The merger would have a tougher time winning approval if enforcers take a broader view and see the combination as uniting two of the country’s biggest toymakers, leaving just Lego to keep prices in check, Kanter said.
Another hurdle to consider would be merging cultures and headquarters on opposite U.S. coasts, Katz said.