Mattel rejects merger proposal from MGA’s Isaac Larian

Published on: 21st May 2018

Isaac Larian made an unsolicited offer to merge MGA with long-term rival Mattel, proposing to take on the role of chairman and CEO of the combined companies himself.

Mattel rejected the proposal, telling Isaac that after the board and its advisors “carefully considered” his proposal, they’d be declining.

“The Mattel Board unanimously concluded that this proposal is not in the best interests of Mattel and its shareholders,” wrote Christopher Sinclair, board member and former Mattel CEO. “Accordingly, the board asked that I advise you that Mattel is not interested in further discussing this matter with you.”

The offer, which did not place a value on publicly traded Mattel, was made as MGA Entertainment is enjoying steady success, particularly with the L.O.L. Surprise! range, and as Mattel attempts to refocus after a disappointing spell.

“MGA made more profits in four quarters than Mattel has made in four years,” Isaac claimed. He said he had previously met with Mattel in April 2015 to discuss a merger proposal and resolve the companies’ litigation issues, but the offer was rejected.

(Mattel had sued MGA in 2004, claiming that it stole the idea for Bratz dolls. MGA won the case and has since brought other litigation against Mattel.)

The offer letter states that since then, Mattel’s shares and market cap have been halved, while MGA achieved profits exceeding those of Mattel last year and has “zero debt.” Noting the success of the L.O.L. Surprise! dolls, Isaac claims in the letter that MGA will more than double its profit and sales from 2017 this year. He also anticipates MGA will grow by more than half again in 2019, stating that MGA would “put a value on MGA and its brands and its legal claims against Mattel. Based on this, we will merge.”

Gerrick Johnson, toy industry analyst at BMO Capital Markets, believes that Mattel has a solid strategy moving forward. “It’s not like the auto industry, where it’s going to take you five years to develop something new. They can develop new products in six months. They can change their fortunes pretty quickly. I see no reason they can’t get it done. They have internally recognised intellectual property that’s multi-generational. Everyone knows Barbie. Everyone knows Hot Wheels. Everyone knows Fisher-Price. They’ve got world-class brands.”

Isaac has told the The L.A. Times that attempting to merge with Mattel was not another publicity stunt, dubbing the suggestion “nonsense.” He revealed that his next plan is to go directly to Mattel’s shareholders. “I hope the merger will save this American icon before, like Toys R Us, it is too late.”


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