The $675-million bid that Los Angeles toy mogul Isaac Larian submitted last week to buy hundreds of Toys R Us stores slated for closure has been rejected because it was "way off" in valuing the stores and associated assets, according to a person familiar with the matter.
Larian submitted the bid last week in hopes of buying 274 of the retailer's 735 U.S. and Puerto Rican stores, which serve as a key sales channel for his MGA Entertainment Inc., the maker of Bratz dolls and the hit L.O.L. Surprise toys. He also is offering $215 million to acquire 82 Canadian stores.
Toys R Us filed for Chapter 11 bankruptcy protection in September, and is in the midst of a liquidation and asset auction overseen by the U.S. Bankruptcy Court in Virginia.
Larian, 64, submitted his bid directly to the retailer's bankers, but it was turned down because it was "well below the value of the assets he was proposing to purchase," the person said Tuesday. The assets included not only the U.S. stores but the retailer's intellectual property.
Larian, in a statement, said that he had not yet been notified that his bid was rejected, but that he now planned to continue pursuing the stores through the formal bankruptcy process.
"It is our hope and expectation that we can continue to participate in the bid process, so we can keep fighting to save Toys R Us. We feel confident that we submitted a fair valuation of the company's U.S. assets in an effort to save the business and over 130,000 domestic jobs," the statement said.
Tuesday's news is among a series of disappointments for Larian in his quest to save the retailer.
In March, after Toys R Us announced its plans to liquidate its inventory, Larian told The Times that the news came as a shock to him and many in the toy industry who were under the assumption that Toys R Us would find a way to restructure.
Larian tried to move quickly to buy some of the retailer's assets, launching #SaveToysRUs, a $1-billion GoFundMe campaign that started March 21.
But that campaign raised only $62,000 from more than 2,020 people as of Tuesday — on top of $100 million that Larian personally pledged and another $100 million from other undisclosed large investors.
Larian has said he never expected to raise millions on the crowdfunding platform, but instead hoped the PR stunt would attract other large investors who would want to join Larian in bidding for Toys R Us.
And for a moment, Larian was optimistic as he gained interest from private investors — including other toy companies — who expressed interest in helping Larian make a play for Toys R Us.
Those hopes were quickly dashed, though, when other toy companies backed out of the investment. Larian told the Associated Press that they were public companies not thinking about the future.
With his #SaveToysRUs campaign seemingly fizzling out, Larian then sprang to save Toys R Us via his $890-million bid for 356 stores in the U.S. and Canada. He said that funding for his bid came from him personally, as well as from investors and bank financing. MGA said the company did not participate in the financing.
Larian said last week that he does not plan to use any of the money pledged by small donors through the GoFundMe campaign.
Larian had hoped to secure ownership of the stores quickly because the retailer is now liquidating. "Every day that goes by, the value of Toys R Us declines and more people lose their jobs," he said last week.
Larian has said that the 130,000 U.S. jobs at risk include not only those at Toys R Us but also at suppliers, distribution centers, trucking companies and other firms tied to the retailer. They include MGA's Little Tikes plant in Hudson, Ohio. It makes children's wagons, furniture and other toys, employs 1,200 and sells 40% of its products through the retailer.
Toys R Us filed for Chapter 11 after suffering falling sales for years as Amazon and other online competitors ate into its business. It also was saddled with $5 billion of debt stemming from its 2005 buyout by a trio of investment firms that took the company private.
Larian is not the only bidder for Toys R Us.
An attorney for the retailer said in Bankruptcy Court last week that it has received multiple bids topping $1 billion for its Asia stores. Larian previously told The Times that he is not interested in acquiring stores outside North America and instead wants to focus on the U.S. and Canada.
Larian has not been specific about his plans, but over the last several weeks he has said he wants Toy R Us to be as interactive and as kid-friendly as a theme park — a place where children can play and try out new toys.
6:15 p.m.: This article was updated with additional background on Larian's bid.