CALIFORNIA : Jakks Seeks to Expand Its Toy Line With Flying Colors

Jakks Pacific Inc., the Malibu-based maker of action figures and other toys, on Thursday agreed to buy closely held Colorbok Paper Products Inc.’s Flying Colors unit for about $34.5 million in cash as part of a plan to expand its line of toys.

Jakks’ purchase from Michigan-based Colorbok would add a leading brand of activity toys to Jakks’ existing products, which include action figures, featuring characters from the World Wrestling Federation; die-cast collectibles; and toy vehicles produced under brand names such as Road Champs and Remco.

The acquisition, which is the largest yet by Jakks, is expected to be completed within 30 days, the company said.

Flying Colors, which had sales of $54 million in the fiscal year ended May 31, has toy lines that include molded plastic activity sets, clay compound play sets and lunch boxes. Licensed characters from Nickelodeon’s Rugrats and Blue’s Clues, Warner Bros.’ Looney Tunes, Mattel’s Barbie and Sanrio’s Hello Kitty are often pictured on the products.

“We’re looking for more acquisitions that fit our profile and have a strong brand,” Jakks President and co-founder Stephen Berman said. “We would never bet the ranch on one product. We look for items that are evergreen and that will grow.”

Jakks competes with toy-making giants Mattel Inc. and Hasbro Inc. But unlike the two bigger companies, whose stocks have flagged recently, Jakks shares have climbed more than threefold this year. On Thursday, they surged $4.19 to close at $37 on Nasdaq.

Jakks’ purchase would include a three-year payment agreement, known as an “earnout,” in which Jakks would make payments totaling $15.5 million to two Flying Colors executives who would join Jakks, if they achieve new growth targets for the product lines.

Jakks expects the purchase to boost earnings immediately. Some Flying Colors operations will be transferred to Jakks’ U.S. and Hong Kong offices.