Mattel Surges on Report of Hasbro Takeover Discussions

Updated on
  • Offer up to mid $40-a-share could be accretive, analyst says
  • Bloomberg reported last year that companies had held talks

Takeover Talks Send Mattel Shares Surging

Mattel Inc. gained as much as 23 percent on a report that Hasbro Inc. has discussed an acquisition, a deal that would unite the two largest U.S. toymakers.

Hasbro made a recent takeover approach, but the terms of a potential deal weren’t clear, the Wall Street Journal reported after the close on Friday. That sent Mattel’s shares as high as $17.95 on Monday -- the biggest intraday rally since at least 1980. Hasbro stock also rose.

Mattel takeover speculation surged last month after an analyst suggested that the company may be better off as an acquisition target. The merger talk followed a surprisingly sharp sales decline at Mattel last quarter. The toy company, which makes Barbie and Fisher-Price, suspended its dividend and escalated a cost-cutting push to cope with the slump.

An acquisition “makes great sense and could be highly accretive for Hasbro,” BMO Capital Markets analyst Gerrick Johnson said in a note. Mattel’s “power brands” -- Barbie, Fisher-Price, Thomas, Hot Wheels and American Girl -- could be worth more than $8 billion, while other brands, such as He-Man and Polly Pocket -- may add more than $2 billion, he said.

Johnson said that an offer of as much as the mid $40-a-share range could still add to Hasbro’s earnings. Hasbro shares jumped as much as 8.1 percent, the most in almost seven months, to $98.88 on Monday.

Mattel, based in El Segundo, California, also blamed the bankruptcy of Toys “R” Us Inc. for hurting sales, especially in North America.

Mattel and Hasbro declined to comment on the possible merger talks.

Bloomberg’s Emma Chandra takes a look at the surge in Mattel Inc. shares.

(Source: Bloomberg)

Bloomberg reported last year that Mattel and Hasbro have held merger discussions. The companies have held on-and-off-again talks about a deal, people familiar with the situation said at the time.

Since then, Mattel’s condition has worsened, making it a cheaper possible target. Mattel had a market valuation of about $5 billion at Friday’s close, compared with more than $11 billion for Pawtucket, Rhode Island-based Hasbro. Mattel shares had fallen 47 percent this year through Friday’s close.

A deal would amass a trove of household names, teaming up Mattel’s brands with Hasbro’s Nerf and Monopoly.

Mattel has been pursuing a comeback plan under a new chief executive officer, Margo Georgiadis, who previously worked at Google. The company is still reeling from the loss of its Disney Princess franchise to Hasbro in 2016. And sales of Barbie dolls, Mattel’s biggest product, have been uneven.

Seeking Financing

Mattel also has been talking to its banking partners about alternative forms of financing, including an asset-backed loan. The company has $250 million in bonds maturing in March.

“2017, in my view, is a reset year for Mattel,” Georgiadis said in an interview last month.

The Toys “R” Us bankruptcy in September dealt another blow to the industry, weighing on holiday sales prospects.

“We did have a real challenge with the timing of that bankruptcy,” Georgiadis said. “The whole industry felt the pressure.”

— With assistance by Courtney Dentch

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