) has entered into an agreement to acquire Mega Brands Inc., a
leading Canadian toy maker for $460.0 million, including all the
outstanding common shares and warrants of Mega Brands.
Per the agreement, Mega Brands shareholders will receive C$17.75
per share in cash. This represents a premium of 32.0% to the
30-day volume-weighted average price of Mega Brands' common
shares on the TSX exchange as of Feb 26, 2014.
The acquisition would help Mattel to expand in two of the
fastest-growing toy categories, construction building sets and
arts & crafts categories. Per media reports, this acquisition
will also help Mattel to hold its own ground against leading toy
makers like Lego and
). Moreover, it will allow Mattel to extend its reach into new
and growing categories while accelerating global growth.
Mattel intends to finance the acquisition with a combination of
debt and cash in hand. In Feb 2012, the company acquired HIT
Entertainment, one of the largest independent owners of preschool
intellectual property for $680 million in cash. The company has
been on acquisition spree but it seems that it would be a bit
risky for the company to make such acquisitions with respect to
its liquidity position. As of Dec 31, 2013, cash and equivalents
were $1.0 billion, down from $1.3 billion as of Dec 31, 2012.
Meanwhile, long-term debt was $1.6 billion, up from $1.1 billion
as of Dec 31, 2012. Moreover, as per reports, the company would
have to raise more debt in order to finance this acquisition. Net
cash flow from operating activities plunged 45.2% year over year
to $698.0 million in 2013.
On Jan 31, 2014, this Zacks Rank #5 (Strong Sell) company posted
dismal results with earnings and revenue missing the Zacks
Consensus Estimate and declining year over year.
Some better-ranked stocks in the toys and games industry include
JAKKS Pacific, Inc.
Take-Two Interactive Software Inc.
). Both these stocks carry a Zacks Rank #2 (Buy).
HASBRO INC (HAS): Free Stock Analysis Report
JAKKS PACIFIC (JAKK): Free Stock Analysis
MATTEL INC (MAT): Free Stock Analysis Report
TAKE-TWO INTER (TTWO): Free Stock Analysis
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