What's going on?
The Wall Street Journal reported late on Friday that toy giant Hasbro had made an offer to acquire rival Mattel, a deal that would combine the two biggest US toymakers – and marry up Barbie and G.I. Joe!
What does this mean?
Mattel’s stock price has dropped by almost half this year as profits have fallen. Its new CEO has embarked on a turnaround plan aimed at boosting sales and making its business more efficient. Meanwhile, Hasbro’s shares have gained almost 20% this year, partly thanks to toys associated with blockbuster movies such as Disney’s Star Wars franchise. A combination would allow the companies to cut costs and combine their resources to create toys that can compete for children’s attention in an increasingly tech-influenced world (see below).
Why should I care?
For the market: Shares of both companies jumped – but there’s no guarantee this deal gets done.
Mattel’s shares jumped more than 20% in late trading on Friday as investors assumed Hasbro would pay a premium to acquire Mattel (as is typical in a takeover). Hasbro’s shares jumped about 3%, suggesting investors think the idea is a good one. But it’s not clear that Mattel would play ball: for one, it may not want to sell itself at a relatively low price just as it begins its turnaround plan.
The bigger picture: Technology is a big threat to the traditional toy industry.
One of the biggest challenges facing Mattel, Hasbro and their European rival Lego is competing for kids’ attention in a world dominated by iPads and other electronics. In a big nod to the challenges facing the industry, Mattel hired a senior Google executive to become its CEO earlier this year. She is focusing on, among other things, developing internet-connected toys and using feedback from the data collected to improve Mattel’s toys. Real-life toys still hold a lot of appeal for kids (and parents who don’t want their kids constantly watching screens). The challenge is incorporating technology to enhance the playing experience.