Toy makers have been struggling over the past couple of years, and as many seek to find cost-saving solutions, major mergers between competitors have now become a thing. Some of these companies, however, are in such a bad state that finding anyone who would be willing to buy them out at a reasonable price is an impossibility.
One of these companies is Mattel Inc (NASDAQ: MAT), a toy manufacturer that recently has tried a second time to merge with privately held MGA Entertainment. Unfortunately for Mattel, MGA’s CEO blatantly rejected the offer for a second time, going so far as to say that “Mattel cannot be salvaged.”
MGA’s CEO Isaac Larian viciously rejected the Mattel offer in an official statement that called off the potential merger between the two toy companies. This is an extremely bad development for Mattel, which was hoping that a buyout offer would offer an easy way out of the company’s problems.
“With close to $4 billion in debt at an average interest rate of 6.58% (as of March 2019), a staggering 42% in operating expenses, and a major legal liability for having sold a faulty Fisher Price Rock ‘n Play Sleeper for years even as multiple baby fatalities occurred, there is simply too much mess to clean up at Mattel,” the statement said. “It is my opinion that Mattel cannot be salvaged at this point and most certainly not under the current, hostile board and management As such, after considering the disastrous financial details of Mattel, and the direction its board and management are pursuing, I think, at this time, it is in the best interest of MGAE not to continue forward with a Mattel offer.”
Mattel currently has around $3.6 billion in liabilities, a massive amount for a company whose market cap is $3.8 billion. The company also made news earlier in April when they recalled one of their product lines which led to the death of an infant. Analysts estimate that the recall would cost Mattel an extra $40 million to $60 million in total.
Shares of Mattel fell by 2.83 percent on Friday, with prices expected to fall even further on Monday once investors respond to the rejection. The company’s stock has fallen by 34 percent over the past six months, with Mattel showing few to no signs of a potential recovery.
Currently, most analysts covering the toy maker have the stock at a “hold” rating, although few see any way for the company to stage a significant comeback without a merger, something that seems quite impossible as few companies would be willing to take on the $3.6 billion in debt Mattel has.
Mattel Company Profile
Mattel manufactures and markets toy products that are sold to its wholesale customers and direct to retail consumers. The company offers products for children and families, including toys for infants and preschoolers, girls and boys, youth electronics, handheld and other games, puzzles, educational toys, media-driven products, and fashion-related toys.
Mattel’s owned portfolio includes Barbie, Hot Wheels, Fisher-Price, Thomas & Friends, and American Girl. In addition, it currently manufactures toy products for all segments both internally and through outside manufacturers. – Warrior Trading News