Mattel, Fisher-Price plan merger Toy makers to challenge rival Hasbro for No. 1 ranking with $1 billion deal

August 20, 1993|By New York Times News Service

In a move that further consolidates the toy industry, Mattel Inc. and Fisher-Price Inc. said yesterday that they would merge in a stock swap valued at $1 billion.

Fisher-Price, a leading maker of toys for preschoolers -- including its chattering telephone and bubble-blowing saxophone -- would become a division of Mattel, the nation's second-largest toy company, which makes Barbie, Hot Wheels and Disney infant toys.

The combined company is expected to pose a considerable challenge to Hasbro Inc., which itself acquired Tonka Corp. in 1991 to form the world's largest manufacturer of toys, games and puzzles, including brand names Milton Bradley, Parker Brothers, Playskool and GI Joe.

Under a merger agreement, each share of Fisher-Price common stock would be exchanged for 1.275 shares of Mattel common stock. The merger, which has been approved by the boards of both companies, requires shareholder and governmental approval.

Mattel, based in El Segundo, Calif., said it expects the merger with Fisher-Price, of East Aurora, N.Y., to be completed by Dec. 1.

The toy makers announced the proposed merger after the stock market had closed. Stocks of both companies closed unchanged yesterday on the New York Stock Exchange, with Mattel at $25.625 a share and Fisher-Price at $23.875.

John W. Amerman, Mattel's chairman and chief executive, said in a telephone interview from New York that the merger would create a company with some of the strongest toy brands and that it would provide a "marvelous opportunity" to market Fisher-Price toys overseas.

Mr. Amerman also said he expected the merger to result in some cost efficiencies but declined to be more specific, only hinting that he anticipated some consolidation of manufacturing plants.

Fisher-Price would continue to be based in East Aurora, located near Buffalo, but it is too early to determine if any jobs would be eliminated as a result of the merger.

But Ronald J. Jackson, Fisher-Price's chairman and chief executive, said in a statement that the merger would increase shareholder value.

It is unclear whether Mr. Jackson and current management of Fisher-Price would continue with the company, but Mr. Amerman said that Fisher-Price would gain three seats on the Mattel board, one of which would be held by Mr. Jackson.

Mattel had net sales of $1.85 billion last year, up from $1.65 billion in 1991. Earnings were $144 million, or $1.43 a share, last year, compared with $122 million, or $1.20 a share, in 1991.

Fisher-Price had 1992 sales of $694 million. The combined total would fall just behind Hasbro's 1992 sales of $2.54 billion.

While Mattel already produces a line of infant toys depicting characters licensed by Walt Disney Co., Mr. Amerman said there was no concern about overlapping markets. Instead, he said, the two lines would complement each other because Fisher-Price's toys were not character-based and aimed at a more educational and developmental market.

Industry analysts said the merger represented a good deal for shareholders of both companies.

In particular, the analysts said they expected sales of Fisher-Price products to increase following the merger, given worldwide demand for the products and Mattel's vast international distribution base.

Fisher-Price now has only limited distribution abroad, and has identified that as an area the company wanted to improve.

Matt Diserio, an analyst with PaineWebber, said the merger would allow Mattel to broaden its product line. "The company gets an inordinate amount of its operating profit, more than 50 percent, from Barbie and Barbie-related products so diversifying away from that makes good business sense," he said.

Fisher-Price was spun off by Quaker Oats Co. in 1991 following two years of losses, after a disastrous foray into products for older children.

Management returned the company to profitability through a strategy of reducing costs through consolidating operations, shifting manufacturing overseas and focusing on core product lines.

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