For those of you not familiar with the Bjork song that inspired this week’s headline, I will give you a brief summary. It starts with the Icelandic singer gently whispering the first verse, up to the point she says the word ‘until’, when the whisper becomes a scream and the next verse is delivered with manic abandon bordering on unhinged craziness. I quote this song only because I see it as a metaphor for the toy industry waiting for news about Toys R Us, and what may happen when that news finally arrives.
I’ve received numerous emails this week asking if I have heard any further news about the sale of the UK operation; trust me, when we know what is happening, we will be shouting it from the rooftops. Right now, the only news this week has been speculative; thanks to the Sunday Telegraph, we have a little more insight into the numbers potentially involved. The report suggested that any potential buyer would have to cough up an immediate £50m to pay off the consortium of banks providing financing to the US parent company. A further £70m would apparently be required in the first year to fund a major overhaul of its store estate and subsidise more competitive pricing. You can read our full story with all the financial details here.
The article goes on to suggest that potential bidders have been scrutinising the accounts of Toys R Us to decide whether to make a bid. The other question I have been frequently asked concerns the identity of these ‘potential bidders.’ In the words of ABC’s Martin Fry, “If I knew I would tell you.” Hilco continues to be mentioned as an interested party, while another name has entered the frame in recent days; Gordon Brothers. Unsurprisingly, both companies are restructuring specialists – and both are already working with the retailer to manage the ongoing stock situation. Presumably, therefore, they are under no illusions about the size of the task they would be taking on, but equally they will be aware of the scale of the opportunity.
The third FAQ from the trade is that if there is to be a deal, what exactly will it entail? Surely no-one will take on the liabilities, chiefly the pension deficit? And would the Toys R Us name even be involved in the arrangement? Most haven’t even considered that point, but I have spoken to a couple of extremely knowledgeable individuals who question whether the parent company would want that to be part of any deal. Hilco, of course, famously bought HMV under what are perceived as similar circumstances, but are they? The HMV acquisition was a seamless transition from one owner to another; the Toys R us scenario looks infinitely more complicated. Perhaps that is why we’re still waiting to hear whether any of the interested parties will step forward with an offer. Keep an eye on our website and twitter feeds; as soon as there is anything to report, we will make sure we spread the word.
In other news, now that the sterling exchange rate has reached the dizzy heights of $1.42, it’s been refreshing to hear that buyers have been calling suppliers to say that they are happy to pay a little bit more for product due to the improvement in the exchange rate. Wait, no, I’m sorry, I was mistaken – apparently this hasn’t been happening at all. As you were. Maybe it’s on their ‘to do’ list for this week?
Elsewhere, it has finally been announced that Basic Fun has acquired K’Nex, a story which first surfaced in Hong Kong over a months ago. It neatly illustrates how long deals like this can take to finalise, so maybe we’ll have to remain patient over the TRU situation for a little while yet.
News has just broken this morning that Saban and Bandai will be not be renewing their Power Rangers agreement when it expires next April, confirming a rumour I heard in Nuremberg from a very reliable source. Bandai will certainly be a tough act to follow, having been synonymous with the brand since its launch. The company has extended its range significantly in recent months, and is already enjoying success with Smooshy Mushy, so it is already preparing for life after Power Rangers. Onwards and upwards.
By the time you read this, I’ll hopefully be mid-air across the Atlantic, travelling to New York for Toy Fair. I had to catch a ‘crack of dawn’ flight in order to arrive in time to attend this evening’s TOTY awards gala. Swish venue, black tie – and it all starts at 6PM (presumably so everyone can be tucked up in bed by 10PM). Only in America…! If anyone wants to meet up at the show, feel free to drop me a line – I’ll be there over the weekend and on Monday morning before I dash back to put the finishing touches to our biggest-ever March issue. Who knows, there may even be some concrete news on Toys R Us before we send the issue to press….