Smyths ‘Project Elf’ plan for Europe to be heard by US court today

Published on: 15th May 2018

Smyths will initially pay €64m for 93 central European stores, documents show.

The bid by Smyths Toys to buy the central European assets of Toys R Us will be considered by a US bankruptcy judge today.

The Irish Times reports that material filed in recent days reveals insight into the proposed €79m deal, which would add 93 stores in Germany, Austrian and Switzerland to Smyths existing 110-store UK and Irish network. The papers disclose that the Smyths deal has been dubbed “Project Elf” by advisers.

The “initial purchase price” to be paid by Smyths for the central European assets of Toys R Us is €64.4m, plus performance-related and escrow payments that could add another €15m.

Smyths appears to have set up a new company to consummate the deal – Smyths Toys EU HQ, which was established last November as “Hopebrook”.

As well as the 93 stores and four websites, the documents reveal that Smyths is buying a near 17% stake in NTG (Network Toys Germany), a technology joint venture that provides data services to German toy retailers.

The deal is due to close at the end of May. Included in escrow payments is €2.5m as collateral in case disputes arise during the deal. A further €6.44m is due in 12 monthly instalments, with the balance paid after 18 months.

The buyout deal contains a pledge that, if the US bankruptcy judge orders a further competitive process to sell the assets, the Smyths offer will serve as a “stalking horse” arrangement. The deal’s “longstop date” is listed as 31st May, which means the contract may be terminated if the transaction does not close by then.

The documents show that 69% of the purchase price relates to the German stores, 9% to Austria and 22% cent to Switzerland.

Market watchers have speculated that the possible sale of a further 100 or so Toys R Us outlets in France and Spain could provide further opportunity for Smyths to expand, turning it into a truly pan-European force.

A note in the sale documents for the Smyths buyout of the central European division says that some of the financial material has been redacted so as not to disclose it to Toys R Us in Spain and France.

However, last night Smyths confirmed that “we have no plans for France or Spain Toys R Us”.


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