Toy Firms Make Record Deal for ‘Star Wars’

In the biggest licensing deal ever tied to a single entertainment property, Hasbro Inc. and Galoob Toys Inc. announced Tuesday that they had separately reached agreements with Lucasfilm Ltd. for licensing rights to the next three “Star Wars” movies.

The companies are giving Lucasfilm combined stock worth more than $225 million, in addition to royalties that should far exceed that amount. The films are expected to reach theaters beginning in 1999. The two companies also gain rights to negotiate on other Lucasfilm projects over the next decade.

The only other deal that likely exceeds this agreement is the far-reaching partnership between Walt Disney Co. and Mattel Inc. of El Segundo, the U.S.’ biggest toy firm. That agreement, initiated in 1987, included stock options granted to Burbank-based Disney by Mattel of at least $3 million.

Both San Francisco-based Galoob and Pawtucket, R.I.-based Hasbro have already been manufacturing toys based on “Star Wars.” The film trilogy--”Star Wars,” “The Empire Strikes Back” and “Return of the Jedi”--were originally released from 1977 to 1983. With the theatrical re-release of the revamped films this year, the total box office take of the trilogy is approaching $2 billion worldwide. “Star Wars” is the single highest-grossing film of all time.

Hasbro is the No. 2 toy maker, behind Mattel. It is granting 6.5 million shares of stock, currently worth more than $170 million, to Lucasfilm. That represents just less than 5% of the company’s outstanding shares.

Hasbro Chairman Alan G. Hassenfeld stressed that the deal is aimed at “creating shareholder value.” Hasbro stock fell 13 cents to close at $26.69 on the American Stock Exchange.

Hasbro originally came by the “Star Wars” license through its purchase of smaller toy maker Kenner from General Mills in the 1980s; “Star Wars” creator George Lucas had made an in-perpetuity agreement with Kenner in the 1970s.

Galoob began its association with Lucasfilm in 1992. It will grant Lucasfilm warrants for 3.6 million shares of Galoob stock--nearly 20% of its shares outstanding--at an exercise price of $15. It will also pay San Rafael-based Lucasfilm $140 million in advances against royalties staggered over several years, beginning in 1999. Galoob shares rose $1.94 to close at $17.50 on the New York Stock Exchange.