Mattel set to pay $460M for Mega Brands
Toy giant locks up megadeal with second-largest player in the kids’ building blocks segment
Touch-screen gadgets have become so sophisticated, yet so intuitive that even a toddler immediately knows how to use an iPad. These shiny, interactive screens also offer kids limitless opportunities to build virtual worlds in an instant.
Does the humble interlocking brick, little changed for decades, really stand a chance? Actually, to quote the theme song from The Lego Movie, Everything Is AWESOME!!!
Construction sets, such as Lego and Mega Bloks made by Montreal’s Mega Brands, was the fourthfastest growing toy category last year. And judging by The Lego Movie’s massive box office take (No. 1 for three weekends and counting), snap-together plastic bricks are even experiencing a cultural renaissance.
When playing with these kinds of toys, children are captured by being able to create whatever they can conjure up in their imagination, with their hands, all while building skills from math to physics and even teamwork on joint projects, said Nina Howe, professor of early childhood and elementary education at Montreal’s Concordia University.
“Young kids very much like the sensory-motor aspect, being able to feel and touch and to construct and build,” she said. “You can’t do the same thing on a screen. There is something about the threedimensional aspect and being hands on that’s really important for young kids.”
It’s what prompted Mattel Inc. to agree to pay $460 million US for Mega Brands Inc., the second-largest player in the building blocks segment where the toy giant doesn’t already have any offerings.
After Friday’s announcement of the friendly deal, Mattel chairman and chief executive Bryan Stockton said its purchase of Mega Brands would “immediately position us to be a meaningful player in the construction category.” Buying Mega Brands was easier than launching a construction line of its own.
“If you think about how construction works, it’s not just a boy’s toy anymore and it really crosses gender and ages and things,” Stockton said during a conference call with analysts. “So we think it’s a great opportunity to expand our brands like Barbie and Hot Wheels into this important category.”
Mattel’s agreement with Mega Brands offers the Montreal company $17.75 per share, a 36-percent premium over Thursday’s closing price. The deal, which has been unanimously approved by the board of directors, is a fantastic exit for chief executive Marc Bertrand and his founding family, as well Fairfax Financial Holdings Ltd., who together hold approximately 39 per cent of the outstanding shares.
Meanwhile, the construction toy category continues to rise to new heights.
While overall U.S. toy sales are stalling, dropping to $21.76-billion last year from $21.98-billion in 2012, the construction set category grew from $1.99 billion in 2012 to $2.04-billion last year, says Lutz Muller, a consultant at Klosters Trading Corp., citing NPD figures.