The traditional toy industry is facing a struggle for surival. Facing fierce competition from online stores and with children’s preference moving to electronic toys over traditional ones, the toy industry will have to diversify and expand if it has to survive. Mattel’s rejection of Hasbro’s bid should be seen in this context.
According to sources familiar with the matter at hand, Mattel Inc has rejected Hasbro Inc’s latest takeover move.
The development casts a shadow of uncertainty over the potential combination of the world’s two biggest toy companies.
The development underscores Margaret Georgiadis’, Mattel’s chief executive, seeking to drive a hard bargain during negotiations despite Mattel’s stock under performance in comparison to Hasbro’s.
As per sources, Mattel has cited Hasbro’s undervaluation of the company in its proposed takeover as one of the reasons for the rejection; it has also cited antitrust concerns as a reason to reject the deal.
Although Hasbro’s proposed terms for the takeover bid could not be learned, it is not clear whether both companies will continue to negotiate on the matter.
Over the last two decades, both companies have engaged in multiple rounds of talks over a potential merger.
Sources preferred the cover of anonymity since the matter is confidential.
While Mattel declined to comment, Hasbro did not immediately respond to requests for comment.
If both toymakers were to combine forces, it would create a powerhouse as it would unite Hasbro’s My Little Pony, Nerf and Monopoly brands with Mattel’s Hot Wheels and Barbie dolls toys. The merger also has the potential to provide Hasbro more pricing power to negotiate with entertainment studios over movie and Television franchises.
Hasbro’s latest outreach to Mattel has been from a position of strength: before the breaking of this potential merger by WSJ, Mattel’s shares were down 47% while Hasbro’s were up by 18%.
While Hasbro’s market capitalization is $11.8 billion, Mattel’s is $6.3 billion.
The development will be better appreciated in the context of the September bankruptcy of Toys “R” Us, the biggest U.S. toy retailer; the entire sector is facing a monumental struggle with children preferring modern toys over traditional ones.
In fact, Mattel has cited this bankruptcy as a reason for its weak sales.