Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Children have been mixing and matching their toys for years. Now comes news that Mattel and Hasbro may be trying to combine their toy boxes.

Bloomberg News reported Thursday that the two companies have held talks about a possible combination that would bring Barbie together with Luke Skywalker figurines. It's not clear yet how a deal might be structured (or how it could get past regulators) but let's discuss.  

Hasbro reportedly approached Mattel, but Mattel may be the one that needs a deal more right now. While Mattel has been the larger company for the bulk of the last 20 years, Hasbro has been closing the gap. For a good chunk of 2015, it was actually the bigger one.

Catching Up
While Mattel has traditionally been the bigger company, Hasbro has caught up.
Source: Bloomberg

Hasbro is growing revenue at a time when Mattel is experiencing a string of annual declines. Whereas the strong U.S. dollar and weaker demand for former hot items like American Girl and Barbie dolls are wreaking havoc on Mattel's sales, Hasbro is set to report a more than 1.5 percent gain for 2015. The toymaker is getting some help from its deal to sell toys for the latest Star Wars movie,  a box-office smash. This dynamic is only going to get more pronounced as the lucrative contract for the Frozen and Disney Princess dolls transfers to Hasbro from Mattel.  While Mattel recently unveiled a wider lineup of Barbies in the hopes of reviving its flagship brand (options include curvy, petite and tall versions), it's not clear yet how the comeback will fare.

Head to Head
Hasbro has outperformed Mattel over the last year.
Source: Bloomberg

One option for structuring is a merger-of-equals stock swap similar to what chemical makers Dow and DuPont undertook last year. That may be the most likely path, given the toymakers' similar size, and they'd be able to avoid wading into volatile debt markets. 

The companies' portfolios are complementary, with Hasbro traditionally more focused on boys' toys and board games like Monopoly, and Mattel focused more on girls. Combining could help smooth out the volatility that comes with toys tied to blockbuster movies that are hot for a quick minute and outdated the next. Then there are the massive opportunities for cost cuts and cross-selling.

Beating Out Barbie
Hasbro has been growing revenue faster than Mattel recently.
Source: Bloomberg
2015 results are estimated for Hasbro, which is schedule to report earnings Feb. 8.

No matter the structure, any deal between Mattel and Hasbro will draw antitrust scrutiny. Lego is the only major global competitor and it would become a distant second should the two biggest toymakers combine. Regulators have shown more mettle in opposing mergers lately. Comcast's bid to buy Time Warner Cable and Sysco's merger with US Foods are among those that have collapsed in the face of pushback. That said, a combined Mattel-Hasbro would control just 20 percent of the retail toy market, according to estimates from Euromonitor and Jefferies. That isn't necessarily a prohibitively dominant share in the fragmented market. 

Mattel previously tried to acquire Hasbro in the 1990s , but gave up only weeks later after Hasbro said antitrust obstacles would be insurmountable and waged what Mattel called a ``scorched earth" campaign to block a deal. Hasbro even went so far as to get legislators in its home state of Rhode Island to change state law to help protect it from a hostile bid.

Apparently the companies are feeling more friendly toward one another now, but Hasbro may still be the one best able to control the board in this Monopoly game.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. It's worth noting that Mattel proposed a stock swap when it tried and failed to acquire Hasbro in the 1990s.  That could give a sign as to the possible structure this time around. 

To contact the author of this story:
Brooke Sutherland in New York at

To contact the editor responsible for this story:
Beth Williams at