No toy story: Hasbro says it’s not for sale
Written on June 27, 2010
Hasbro Inc., the nation’s No. 2 toymaker, said Thursday it is not having discussions regarding the sale of the company, contradicting a published report that briefly drove the company’s stock higher.
In a statement, the maker of such toys as G.I. Joe, Transformers and Mr. Potato Head confirmed that it had been approached by a private equity firm it did not identify regarding a transaction, but said that its board concluded that it would not pursue a deal.
A report in Thursday’s Wall Street Journal said Pawtucket, R.I.-based Hasbro (HAS) recently held preliminary talks with private-equity firm Providence Equity Partners.
The company’s stock price soared as much as 12% in pre-market trading, before losing steam after the statement. Hasbro’s stock price rose 3.1% Thursday to $42.35 a share.
The Hasbro talk came about a month after the world’s largest toy retailer, Toys "R" Us Inc., announced plans to raise $800 million through an initial public offering, marking its second turn in the public market. In 2005, under pressure from slumping sales, Toys "R" Us was taken private for $6.6 billion by a group led by Bain Capital, Kohlberg Kravis Roberts & Co, and Vornado Realty Trust.
Some analysts say that mature companies such as Hasbro and Toys "R" Us, with relatively limited growth prospects, tend to seesaw between private and public status over time as a way to improve the business’ performance.
"By taking the company private, you can unload debt, improve the business, and make management changes," said Sucharita Mulpuru, a retail analyst for Forrester Research.
Hasbro had about $4.1 billion in sales in 2009 and is currently sitting on about $1.4 billion in long-term debt. Its market capitalization is about $6.1 billion.
Speculation about Hasbro’s intentions came as no suprise to Mulpuru, who said that the advent of electronics and Apple’s (AAPL, Fortune 500) prowess in handheld devices have encroached on the traditional toy market, making it more difficult for these companies to compete.
Although Hasbro has denied the report that it will pursue a deal, Mulpuru said that a transaction could still be in the offing, if the price was right.
"There’s a good chance that it could be a veiled invitation for more bids," said Mulpuru. "Where there’s smoke, there’s fire."
Filed in: management.