Mattel Bids $5.2 Billion but Hasbro Won’t Play
No. 1 toy maker Mattel Inc. on Wednesday proposed a $5.2-billion merger with rival Hasbro Inc., saying it will pursue a deal despite Hasbro’s rejection on antitrust grounds.
Mattel proposed a stock swap that would marry the El Segundo-based maker of Barbie with Rhode Island-based Hasbro, the nation’s second-largest toy maker and home of G.I. Joe. The combination would create a stronger and more diversified company with greater profit potential, Mattel said.
Hasbro said its board unanimously rejected the offer, concerned that regulators would oppose the deal.
“It is incredibly presumptuous of Mattel and its board to believe that they could force a combination of their company and ours through the Federal Trade Commission, the State Attorneys General and the European Union Merger Task Force,” Hasbro said in a statement.
Undeterred, Mattel Chairman John Amerman discounted the possibility of regulatory challenge and said in a letter Wednesday to Hasbro’s board that he hopes the offer will appeal to Hasbro’s shareholders.
“We are satisfied that any potential antitrust issues can be resolved without affecting the significant benefits that will be realized,” Amerman said in the letter.
Mattel said those benefits--including increased production efficiencies and stronger international marketing--would create savings of $100 million during the first year alone.
“As you know, we are only prepared to proceed on a negotiated basis,” Amerman said.
Mattel shareholders would get one share of stock in the combined entity for every share of existing Mattel stock. Hasbro shareholders would receive 1.67 shares of stock in the new company for each share of existing Hasbro stock. That would mean a 73% premium over the price at which Hasbro shares closed Tuesday, Mattel said.
Mattel announced its merger offer after the close of financial markets Wednesday. Hasbro slipped 12.5 cents to $30.625 on the American Stock Exchange, but in after-hours trading, Hasbro rocketed to $47.875 before the exchange halted all trading in the stock. Mattel closed up 12.5 cents at $32 on the New York Stock Exchange on Wednesday, before the announcement was made.
Industry analysts said the Mattel offer may prompt other bids.
“Price-wise, it’s a good offer,” said David Leibowitz of Burnham Securities in New York. “But this offer may create open season on Hasbro because other companies may now decide to join in the bidding. The antitrust issues could be the real obstacle for Mattel.”
The regulatory prospects for such a merger are mixed, said Barry Pupkin, an antitrust lawyer at Squire, Sanders & Dempsey in Washington.
“Clearly there are possible antitrust problems,” he said, “but regulators would not just look at the overall toy market. They will look at market segments because dolls don’t compete with G.I. Joe. . . . They have to look at various product lines and determine if a combined company would have general dominance.”
Under Amerman, Mattel has tried to expand into other toy market segments but remains weak in the categories of board games and toys for boys. Hasbro--with its G.I. Joe and Milton Bradley and Parker Bros. board games--is strong in those areas, industry analysts say.
Even if a Mattel-Hasbro deal creates a company strong in all toy categories, regulators could still approve a deal if they conclude other companies could enter and compete in the industry, Pupkin said.
A Mattel-Hasbro deal would be the second major merger for Mattel in two years. The company acquired Fisher-Price in 1993.
The industry as a whole has been consolidating to win increased clout with such powerful retailers as Toys R Us and Wal-Mart.
“Consolidation is the name of the game for all of us,” said Jim Klein, president of Applause Enterprises, a maker of plush toys formed in a merger in June.
But he said a union of Mattel and Hasbro “is like Ford and General Motors” joining forces. “It’s an incredible combination.”
Much of Mattel’s success is due to savvy marketing of Barbie, which accounts for more than one-third of its annual sales. Mattel has also built a close relationship with Walt Disney Co., licensing its characters for fashion dolls and infant toys.
Mattel and Hasbro are the clear sales leaders in the toy industry. In 1994, Mattel had sales of $3.2 billion and Hasbro $2.7 billion. In contrast, No. 3 toy maker Tyco had $750 million in sales. (Mattel and Hasbro will soon report their 1995 sales figures.)
Mattel first approached Hasbro about the possibility of a merger in April, said Wayne Charness, a Hasbro spokesman. Glen Bozarth, a Mattel spokesman, would not comment on whether the company would mount a hostile bid for Hasbro should further appeals to the company fail.
It would be difficult to force a hostile sale. There are two members of the founding Hassenfeld family on Hasbro’s board, including Chairman Alan Hassenfeld, 46, who took over management of the company after the death of his brother, Stephen, in 1989. The family controls 9% of Hasbro’s shares.
Times staff writer Denise Gellene contributed to this report.
