As I may have mentioned before, the Friday Blog is generally written on a Thursday afternoon. This gives me some breathing space to turn it over in my mind, just in case I decide that I’ve gone too far with a particular comment or story (I know you may find that hard to believe, but it does happen…!).
When I wrote last week’s Blog, I started by observing what a big news week it had been and how I couldn’t remember a week like it in all my years in the toy industry. Little was I to know at that stage that the two biggest stories of an unprecedented week were yet to drop.
The news about merger talks between Hasbro and Mattel broke in the USA late last Thursday afternoon, necessitating a hasty re-write of the original Blog on Friday morning. At that point I had little or no time to speak to anyone about the development, and details were sketchy at best, so I couldn’t really offer any illuminating comment. In fairness, details are still sketchy, as I gamely tried to explain to a procession of consumer media outlets all eager for clarification. They all wanted to know if the merger – or takeover as I told them it would effectively be – was likely to go ahead; unfortunately, a simple ‘yes or no’ soundbite was impossible. Nor was it easy to second guess the anti-trust regulator’s response to the move, although I felt I was on safer ground dismissing this as unlikely. So for those who saw me on Sky News or heard me on Radio 5 Live, I hope I didn’t come across too vague: all I will say is that the extensive background I gave both researchers was completely ignored by the presenters, who asked completely random questions that I wasn’t told about in advance. When asked a daft question by someone who has absolutely no idea what’s going on, it’s not easy to give an erudite response.
So a week after the news broke, are we any the wiser? Technically no, although the overwhelming consensus of industry opinion is firmly behind the idea that the merger won’t take place. I can think of many reasons why it would potentially falter, not least the diametrically opposite corporate cultures of the two companies: personally I see internal resistance as far more of a threat than the anti-trust regulator. Although both parties have remained tight-lipped on the prospect of a deal, Hasbro CEO Bryan Goldner did hint this week that smaller acquisitions were Hasbro’s most likely route to grow its business. So for now it looks like Hattel / Masbro may not materialise, which will come as a huge relief to the vast majority of retail buyers, toy companies and licensors I spoke to, all of whom were petrified at the prospect of such a gargantuan player dominating the market. And let’s not rule Disney out of the equation: I can’t believe that Hasbro would have made the move without checking with them first (remember what happened with DreamWorks last summer…), so it is entirely plausible that a deal would have effectively resulted in a tri-party alliance of Hasbro, Mattel and Disney – can you imagine the power that such an operation would wield?
However unlikely it appears though, I still remain wary of dismissing a deal out of hand – a month ago most people thought that the Sainsbury’s acquisition of Argos was unlikely to reach fruition. The announcement did bump up the share price of both companies, which may well have been the intention all along.
As if this wasn’t enough for one week, last Friday afternoon saw VTech announcing that it had agreed a deal to acquire LeapFrog for $72m. This came completely out of the blue: even senior VTech personnel in the UK only found out minutes before the news was made public, and had no inkling that talks were even taking place. Just after I spoke to head honcho Graham Canning, he told me he was planning to throw his mobile in the Thames due to the volume of calls he was suddenly being inundated with. As the original release was ambiguously worded, let me just clarify that if the deal is confirmed, it will most definitely not be a merger: it is very much a takeover. Also, contrary to original reports, the new company wouldn’t be called LeapFrog. Some observers have suggested that the price is on the high side, but given the fact that LeapFrog has a stronger position than VTech in the USA, I should imagine that would be where the money will be largely recouped. Without wishing to speculate on what might happen in the
UK if the deal is signed, perhaps thinking back to the old arrangement between VTech and IQ Builders might offer a clue as to how things could possibly pan out. As ever, we will keep you posted on further developments as and when they become clear.
If anything exciting happens today, I won’t be able to amend the Blog as I’ll be in a plane on my way to New York for Toy Fair, so if you head up a company which is planning a merger or acquisition, it would be very much appreciated if you could hold on until next week to announce it. Thank you.