Mattel’s stock “continues to surge” this morning following unconfirmed reports Friday that Hasbro had made an offer to — depending on who you read — forge a working relationship between Barbie and a bunch of toys that traditionally appeal mostly to boys, such as G.I. Joe and the Transformers. Its “shares are set to open at a three-month high Monday after a 22% surge in pre-market trading that followed multiple media reports of a takeover approach,” writes Martin Baccardax for The Street.
The Wall Street Journal’s Dana Mattioli and Paul Ziobro broke the story that Pawtucket, R.I.-based Hasbro had recently “approached” El Segundo, Calif.-based Mattel about combining forces, “according to people familiar with the matter.” But, they write, “the terms of any possible deal couldn’t be learned, and the approach may go nowhere.”
Spokespersons at both Hasbro and Mattel said only that their respective companies don't respond to speculation.
That has not stopped commentators around the globe from providing insight into what the possible combination might not only produce but also forefend. Or not. “Merger talks between the two companies have been going on for years, though nothing has materialized out of them,” points out Dennis Green for Business Insider Australia.
“Hasbro has been on the hunt for acquisitions for several years and tried to buy Mattel last year, points out James Dean for the [London] Times. “Some analysts have suggested that any deal would be closely scrutinized by competition officials,” he adds.
“More than two decades ago, Mattel sought to take over Hasbro, but Hasbro rejected that hostile bid, saying the merger would never pass antitrust hurdles,” Michael Corkery and Michael J. de la Merced remind us in the New York Times.
“If the reported deal were to come together, it could create a toy colossus that unites a rich variety of the nation’s best-known playthings, from [Hasbro’s] Easy-Bake Ovens to [Mattel’s] Hot Wheels cars. Mr. Potato Head would be under the same roof as Barbie,” writes Chris Woodyard for USA Today.
“Hasbro's market cap of around $11.5 billion could likely absorb a takeover of Mattel, which has seen a nearly 50% collapse in its share price this year amid a fast-changing retail market that has already claimed rival Toy R Us Limited by way of a September bankruptcy filing,” observes The Street’s Baccardax.
“Mattel has struggled with slumping sales despite hiring a new chief executive early this year, Margo Georgiadis, a former Google executive,” writes James F. Peltz for the Los Angeles Times.
“Mattel in late October reported a 14% drop in its third-quarter sales,” he continues. “… That prompted S&P Global Ratings to lower its ratings on Mattel's corporate debt, and led one analyst to say that Mattel might be better off as a takeover target.”
“We believe its brands and manufacturing footprint could be worth more than $10 billion in their current state,” write BMO Capital Markets’ Gerrick Johnson in a note to clients. “Thus, the company could have value to a financial, industry or entertainment conglomerate buyer.’
“If a deal did go ahead, it would reflect the tech industry's increasingly firm grip on kids’ free time. Although Hasbro clearly has the upper hand, both it and Mattel have to compete with consoles and tablets — how do you get parents to buy Barbie playhouses when video games beckon? It could have long-term consequences for connected toys, too. Hasbro would have a larger stable of tech-driven toys, and could fold Mattel's know-how into its own projects,” observes Jon Fingas for Engadget.
Or use its own Hollywood connections to make stars out of Barbie and friends.
“This month, Hasbro announced that it had sealed an exclusive deal with Paramount Pictures to collaborate on producing films based on Hasbro brands. The two companies have already collaborated on movies based on the toys G.I. Joe and Transformers,” write the NYT’s Corkery and de la Merced.
Indeed, “Hasbro has bet heavily on Hollywood’s cachet, striking licensing deals with Disney for popular princesses and Frozenmerchandise,” Dawn C. Chmielewski writes for Deadline Hollywood. “The Transformers franchise has earned some $3.8 billion worldwide, while the G.I. Joe franchise brought in some $675 million.”
Not small potatoes.