Toys R Us to Acquire Baby Superstore Inc.

Toys R Us Inc., the nation’s leading toy retailer, took a major step in expanding its fledgling Babies R Us division Wednesday with a $376-million deal to acquire the country’s largest chain of infant product stores.

The Paramus, N.J.-based company said it will acquire Baby Superstore Inc. of Duncan, S.C., in a stock swap subject to regulatory and shareholder approval.

“We just started our own division and we think this is a phenomenal marriage,” said Louis Lipschitz, Toys R Us chief financial officer. “What it does is accelerate our expansion.”

The toy retailer, which opened its first of three Babies R Us stores in May with products for infants and toddlers, expects to have at least seven of the stores by the end of the year. Baby Superstore has 70 stores in 21 states in the East and Midwest.

Although Baby Superstore is the leading chain of its type, the company has had a tough year with disappointing earnings.

Baby Superstore earnings for its fiscal first quarter were flat at $3.2 million, or 17 cents a share. It has yet to release its earnings for the second quarter ended July 31.

Baby Superstore stock plunged 30% in late February when the company revised third- and fourth-quarter earnings by $2.1 million. Shares are down almost 50% since then.

Under the proposed deal, which is expected to close by the end of January, Baby Superstore shareholders would receive 0.8121 share of Toys R Us stock for each Baby Superstore share.

Toys R Us stock gained $2.625 to close at $31.50 on the New York Stock Exchange on Wednesday, and Baby Superstore surged $5 to $24.875 on Nasdaq.