Is Hasbro Acquiring Mattel? Stock Rose Due to Rumors
Mattel stock rose more than 20%
Mattel (MAT) shares rose 20.7% on November 13, 2017, following media reports that Hasbro (HAS) made an offer to buy Mattel. However, officials from both of the companies haven’t provided a statement regarding the offer. Notably, Hasbro has made a few failed attempts in the past to acquire Mattel. Hasbro stock closed at $96.83—up 5.4%.
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Why the deal makes sense
Toy makers in the US (SPY) are struggling due to technology. Kids have plenty of alternative modes of entertainment and toy sales have been impacted. Toy makers are facing a new set of rivals including Electronic Arts (EA). Video games, tablets, and other electronic devices are kids’ preferred choices.
Mattel has numerous problems. It didn’t gauge the industry’s shift toward digital and lagged rival Hasbro in terms of sales. Mattel’s iconic brands, including Barbie, are seeing lower sales as kids’ demand has narrowed. The company also lost Disney’s (DIS) Princess license to Hasbro.
Toys “R” Us, the biggest toy retailer in the world and Mattel’s key distribution partner, filing for bankruptcy made the situation worse. Less shelf space due to retailers destocking inventory and margin pressure from imported toys hurt toy makers’ financials.
If the deal goes through, the combination of Mattel and Hasbro would result in a prominent toy company. The deal would bring popular brands like Nerf and Barbie under the same roof. It would provide a competitive edge in terms of pricing and negotiating license pacts. The deal would also likely strengthen the innovation-led digital product pipeline.
The combined entity could focus more on distribution issues aggravated by Toys “R” Us filing for bankruptcy. It would likely enter into a partnership with Amazon (AMZN) and other online players. Notably, Mattel entered into a partnership with Alibaba (BABA) earlier this year to sell its popular brands to Chinese (FXI) consumers through Alibaba’s marketplace.
Mattel stock has fallen ~36.0% on a year-to-date basis as of November 13, 2017.