Classic toymaker Mattel (NASDAQ: MAT) is a publicly traded company under pressure these days, but it seems to have gotten a jump by rejecting a merger offer from MGA Entertainment, a much newer company.
Some would say that the privately held MGA is what Mattel used to be: where Mattel made Barbie, the super-toy of yesteryear, MGA makes Bratz dolls: what your average 5-7 year old is likely to be carrying around these days – as well as LOL Surprise and Li’l Tykes products.
Mattel is near 1-month, six-month and year lows, but news in CNN Business today shows that last night, Mattel rose some 4% in pre-market trading to around eleven dollars and change, after news that the company would not except MGA’s offer.
In an L.A. Times story yesterday, MGA CEO Isaac Larian talked about his motive for going after Mattel aggressively, suggesting that he essentially wants to buy the company out because of their stock losses.
“They’re not delivering. Look at the results,” Larian said.
Part of the motive for Mattel’s no vote on merging would relate to Larian’s demands that he automatically assume the position of chairman and CEO, with all of Mattel’s leadership team resigning, apparently with no severance packages.
“In a letter to Mattel Chairman and CEO Ynon Kreiz that reiterated MGA’s merger offer, Larian listed several financial metrics to illustrate Mattel’s problems, including ongoing operating losses, a higher debt load and lower shareholders’ equity … MGA’s latest offer was conditioned on Larian becoming Mattel’s chairman and CEO, and on all of Mattel’s current directors resigning ‘without any further compensation.’”
The public comment from Mattel?
“(We) unanimously concluded that your proposal is not in the best interests of Mattel and its shareholders.”
Maybe some things are more important than stock price – Mattel has been a major force in the entertainment world over the decades.
It may be unfortunate for shareholders that some of its classic toys are now worth more than a few dozen shares of its stock, but Mattel leaders have hinted at future growth, citing plans to renew marketing of some classic brand and pursue cost-cutting measures.
Maybe a few new McDonalds or Burger King happy meal toy bids will prop up the classic blue-chip toy maker once again.
In the world of mergers and acquisitions, this one could be chalked up to a long shot takeover play that never really had a chance. It’s part of the landscape today as Fed rate cuts and trade wars balance out the general market for relatively calm waters.