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Mattel surges on report that Hasbro discussed acquisition

Bloomberg logoBloomberg 11/10/2017 Nick Turner and Matt Townsend

Video by CNBC

Mattel Inc. gained as much as 24 percent on a report that Hasbro Inc. has discussed an acquisition, a deal that would unite the two largest U.S. toymakers.

The Wall Street Journal reported on Friday that Hasbro made a recent takeover approach, but the terms of a potential deal weren’t clear. The report sent Mattel’s shares as high as $18.10 in late trading. Mattel had been down 47 percent this year through Friday’s close.

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.

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

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

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.

A deal would amass a trove of household names, teaming up Mattel’s Hot Wheels and American Girl dolls 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.”

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