New World Offers $475 Million for Toy Company

New World Pictures, the low-budget Los Angeles movie producer that owns Marvel Comics, on Friday offered $475 million for Kenner Parker Toys.

New World, maker of such cheap thrillers as “Godzilla 1985” and “Reform School Girls,” has amassed more than 8% of the toy company’s shares in recent weeks at prices significantly below Friday’s $41-a-share bid.

Investment analysts said a merger would give fast-growing New World plenty of material for cartoon shows and movies based on Kenner Parker toys and games. Kenner Parker’s products include Play-doh, Spiralgraph and the Monopoly and Clue board games.

A merger would also give New World ready access to the toy market for its 900 Marvel comic book characters, such as Spiderman and the Incredible Hulk.

Another Bidder?

In Beverly, Mass., Kenner Parker said its directors would consider New World’s offer “in the near future.” The company was expected to resist the bid.

“When you look at their businesses, a merger seems to make sense,” one analyst said. “But can a group of conservative Massachusetts toy company executives get along with a bunch of entrepreneurs from L.A.? That’s the question.”

Kenner Parker’s shares soared in heavy trading, indicating a belief among professional stock speculators that another bidder would emerge. Kenner Parker’s shares closed at $45.875, up $5.50, in composite trading on the New York Stock Exchange.

New World’s shares also gained, closing at $10.875, up 37.5 cents, in composite trading on the American Stock Exchange.

Long regarded as a leading B-movie production house, New World Pictures has broadened its interests since 1983, when it was acquired by Hollywood lawyers Harry Evans Sloan and Lawrence L. Kuppin. It went public in 1985.

New World still comes out with such forgettable films as “Nice Girls Don’t Explode” and “Girls Just Want to Have Fun.” But it had a box office hit last year with “Soul Man” and now produces shows for television, including “Crime Story,” “Rags to Riches” and “Santa Barbara,” a soap opera.

With the acquisition of Marvel last fall, New World expanded into publishing and gained access to hundreds of comic book characters for films. Also last year, New World acquired a controlling interest in Learning Corp. of America, which has a library of over 700 films suitable for syndication. Recently, New World set up a film production company in Australia to develop or acquire films for overseas markets.

“They are broadening their business to become a well-rounded studio on a small scale,” said Curtis L. Alexander, an entertainment industry analyst with Mabon, Nugent & Co., a New York investment firm.

Trial Balloon

Last month, New World told Kenner Parker that it intended to buy $15 million worth of its shares and might buy as much as 15% of the company. Wall Street sources said New World probably disclosed an interest in Kenner Parker last month as a “trial balloon” to draw out other possible suitors for the toy company. New World’s intentions at the time seemed unclear, these sources said. As recently as two weeks ago, New World turned down a large block of Kenner Parker shares that were offered to it at a price well below $41 a share.

Kenner Parker has spent $70 million to buy back its own shares during the last 12 months, according to a spokesman for the toy company. Corporations sometimes repurchase their shares to boost share prices--and thereby discourage unwanted suitors by making the company more expensive. Kenner Parker was spun off from General Mills in late 1985.

Star in a Series

Kenner Parker’s products have been the subject of films and television shows. Mask, a line of boys’ action figures, is the star of a cartoon series, and the board game Clue was the basis of a movie. Television syndicator King World is currently developing a show based on the Monopoly game, Kenner Parker said.

New World, which earned $10.7 million on revenue of $188.9 million last year, didn’t say how it would finance an acquisition of Kenner Parker, which is about three times its size. In a statement, it said that its investment advisers, L. F. Rothschild & Co. and Drexel Burnham Lambert, are “confident that sufficient funds will be available to complete the transaction in a timely manner.”

Kenner Parker said Friday that it earned $6.6 million on $118.1 million in sales in its second quarter ended June 30.

New World is flush with cash after raising $245 million through a sale of stock and high-yielding “junk bonds” last year. It also made about $23 million on its holdings in Taft Broadcasting and Harper and Row when those companies were acquired last year.

Barry Rothberg, a toy industry analyst with Mabon, Nugent, said a merger between New World and Kenner Parker “doesn’t make sense.”

“The idea that there is synergy between a toy company and a movie producer is bogus,” Rothberg said. He argues that a merger would prevent both firms from licensing the comic book or toy characters to the highest bidder.

KENNER PARKER TOYS AT A GLANCE A major designer, manufacturer and marketer of toys and games, the company was a division of General Mills until it was spun off as an independent firm in November, 1985. Its products include the Centurion and Mask lines of action figures, Shimmers dolls, Play-Doh, Easy-Bake toy ovens, Nerf foam balls and Parker Bros. board games such as Monopoly, Clue and Risk.

6 mos. ended Year ended June 30, Dec. 31, (in millions) 1987 1986 Revenue $209.7 502.8 Net income 14.8 16.0

Assets $419 million

Employees 5,850

Shares outstanding 10.75 million

52-week price range (NYSE) $18.00 - $46.25

Friday’s close $45.875, up $5.50