Mattel Drops on Report That It Rebuffed Approach From Hasbro

Updated on
  • The shares had previously surged on takeover speculation
  • Reuters says that Mattel felt proposal undervalued business

A Mattel Inc. Barbie doll.

Photographer: Daniel Acker/Bloomberg

Mattel Inc. slipped in late trading on a report that it rebuffed a takeover approach from rival Hasbro Inc., spurning a deal that could have created the largest U.S. toymaker.

Mattel informed Hasbro that the proposal undervalues the company, according to Reuters, which cited unidentified people familiar with the situation. Mattel also had concerns about the transaction being challenged on antitrust grounds, the news service said.

The shares dropped as much as 7.3 percent to $16.99 in the wake of the report. They had climbed about 30 percent since the start of the month.

Takeover speculation began surging in October after an analyst suggested that the maker of Barbie and Hot Wheels may be better off as an acquisition target. The Wall Street Journal then reported last week that Mattel and Hasbro had discussed a deal.

Mattel, based in El Segundo, California, didn’t immediately respond to a request for comment.

The merger talk followed a surprisingly sharp sales decline at Mattel last quarter. The toy company, which also makes Fisher-Price and the American Girl dolls, suspended its dividend and escalated a cost-cutting push to cope with the slump.

High Price Sought?

Mattel investor Jerome Dodson, who runs the $4.9 billion Parnassus Endeavor Fund, indicated earlier this week that he didn’t expect the company to sell for less than $22 to $25 a share. That’s a premium of at least 20 percent over its closing price on Wednesday.

The Parnassus fund is part of San Francisco’s Parnassus Investments, which owned about 16 million Mattel shares as of Sept. 30. That would make it the sixth-largest investor in the toy company.

“They’ve had their difficulties, but it is still a great franchise,” Dodson said in an interview.

Bloomberg reported last year that Mattel and Hasbro have held off-and-on merger discussions, though no deal emerged.

If Mattel does stay solo, the job of reinvigorating the company falls to new Chief Executive Officer Margo Georgiadis. The Google veteran has been working on a turnaround plan that centers on infusing Mattel’s product line with more technology.

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