MEGA Brands to Add Its Leading Construction and
Arts & Crafts Portfolio to the Mattel Family of Companies and
Best-Selling Brands
Transaction Highlights
- MEGA Brands shareholders will receive
C$17.75 per share in cash ("Purchase Price")
- The transaction represents a total
enterprise value of approximately US$460 million, including the net
debt of MEGA Brands to be assumed or repaid by Mattel, and is about
9.8 times MEGA Brands’ preliminary estimated FY 2013 EBITDA of
approximately $47 million
- Senior Secured Debentures will be
refinanced at closing and holders will receive 105% of par plus any
accrued and unpaid interest
- MEGA Brands shareholders holding
approximately 39% of MEGA Brands common shares have agreed to vote
in favor of the transaction
Mattel, Inc. (NASDAQ: MAT) and MEGA Brands Inc. (TSX: MB, MB.WT,
MB.NT) announced today a definitive agreement for Mattel’s
acquisition, through a wholly-owned subsidiary of Mattel, Inc., of
MEGA Brands for US$460 million.
The acquisition advances Mattel’s global growth strategy of
building upon its world-class portfolio of brands by expanding into
two of the fastest-growing toy categories. MEGA Brands, a family of
leading global brands, is the No. 2 player in the $4-billion
construction building sets category1 with its MEGA BLOKS brand as
well as a competitor in the $2-billion arts & crafts
category2.
“A key pillar of our global growth strategy is the strategic
acquisition of brands that will both benefit from our scale and
help extend our reach into new and growing categories,” said Bryan
G. Stockton, Mattel Chairman and CEO. “The construction play
pattern is popular, universal and has had one of the fastest growth
rates over the past three years. We look forward to helping MEGA
Brands accelerate its global growth, providing more choices for
more children and their families.”
Mattel’s world-class portfolio of brands will complement MEGA
Brands’ flagship MEGA BLOKS® and existing licensed brands, such as
HALO®, Skylanders®, Call of Duty®, Assassin’s Creed®, Power
Rangers®, Hello Kitty®, SpongeBob SquarePants® and others. The
acquisition will give Mattel the opportunity to broaden its
relationship with its entertainment partners.
The acquisition also creates the opportunity to grow the MEGA
Brands sizable arts & crafts business, with brands including
Rose Art® and Board Dudes®. Arts & crafts activities are highly
popular among children of all age groups, and the global category
provides growth opportunities for Mattel with its core brands and
entertainment and licensing partners.
“MEGA Brands has built leading positions in large, growing
categories by providing engaging creative experiences for children
and families through innovative, well-designed and high-quality
products, and Mattel is the ideal partner to take our brands to the
next level,” said Marc Bertrand, MEGA Brands President and CEO. “We
are confident Mattel’s scale and global platform spanning 150
markets – combined with the expertise of our people in the
construction and arts & crafts categories – will create
tremendous growth opportunities for our brands.”
MEGA Brands has estimated net sales for FY 2013 of US$405
million. It ranks among the top 15 toy companies globally in terms
of sales, according to statistics published by the NPD in 2013. In
2013, it achieved record sales of preschool construction toys.
Founded and based in Montreal, MEGA Brands has approximately
1,700 employees in 17 countries. Mattel plans to maintain MEGA
Brands’ expertise in manufacturing, both in Montreal and Tennessee,
and plans to maintain the MEGA Brands headquarters in Montreal and
will seek to tap into MEGA Brands’ proven skills in design and
development in the construction and arts & crafts
categories.
“At Mattel, we have followed a consistent philosophy on
acquisitions – we seek to create value by building on the
foundations of the great businesses we have acquired while
retaining and nurturing the core values, talents and unique
capabilities that made them great,” Stockton said. “We will
approach our new brands and colleagues at MEGA Brands with great
respect for what they have built and enthusiasm for what we can
build together.”
Transaction Details
The agreement provides for the acquisition of MEGA Brands for
C$17.75 per common share and includes the acquisition of all of the
outstanding common shares and warrants of MEGA Brands. This
represents a premium of 32% to the 30-day volume-weighted average
price of MEGA Brands common shares on the TSX as of February 26,
2014. Mattel plans to fund the acquisition through a combination of
new debt and cash on hand.
The purchase price above represents net consideration of C$7.81
per 20 warrants. Warrant holders may acquire one common share of
MEGA Brands in exchange for every 20 warrants at an exercise price
of C$9.94 per common share. The warrants expire on March 30,
2015.
The Board of Directors of MEGA Brands has unanimously approved
the transaction and recommends that MEGA Brands common shareholders
approve it. The financial advisor to the Board of MEGA Brands has
provided an opinion that the consideration proposed to be paid to
MEGA Brands common shareholders is fair from a financial point of
view.
Each of Fairfax, Victor Joseph Bertrand, Marc Bertrand and Vic
Bertrand, who together hold approximately 39% of the outstanding
common shares of MEGA Brands, have entered into voting support
agreements and agreed to vote their common shares in favor of the
arrangement.
The arrangement agreement provides that MEGA Brands is subject
to non-solicitation provisions and provides that the Board of
Directors of MEGA Brands may, under certain circumstances,
terminate the agreement in favor of an unsolicited superior
proposal, subject to payment of a termination fee of US$12 million
to Mattel and subject to a right of Mattel to match the superior
proposal in question.
In connection with the closing of the arrangement, MEGA Brands
intends to refinance and, thereafter, redeem all of its outstanding
10% senior secured debentures due March 30, 2015, at a redemption
price equal to 105% of the principal amount of the debentures, plus
accrued and unpaid interest, pursuant to the terms of the debenture
indenture.
The terms and conditions of the arrangement will be summarized
in MEGA Brands’ management information and proxy circular, which
will be filed and mailed to MEGA Brands shareholders in March
2014.
Advisors and Legal Counsel
RBC Capital Markets is acting as financial advisor, Latham &
Watkins LLP is acting as legal advisor and McCarthy Tetrault LLP is
acting as Canadian legal advisor to Mattel. Rothschild is acting as
financial advisor and Osler, Hoskin & Harcourt LLP is acting as
legal advisor to MEGA Brands.
Live Webcast - Mattel
In conjunction with the announcement, Mattel will webcast a
Securities Analyst and Investor conference call at 8 a.m. Eastern
time today. The conference call will be webcast on the "Investors"
section of Mattel's corporate website:
http://www.corporate.mattel.com/. To listen to the live call, log
on to the website at least 15 minutes early to register, download
and install any necessary audio software.
An archive of the webcast will be available on Mattel's website
for the next 90 days and may be accessed beginning two hours after
the completion of the live call. A telephonic replay of the call
will be available beginning at 11 a.m. Eastern time on February 28
until March 7 at midnight Eastern time and may be accessed by
dialing (404) 537-3406. The passcode is 6286841.
MEGA Brands Conference Call
MEGA Brands will hold a conference call for securities analysts,
investors and media at 9:30 a.m. Eastern time today. Participants
may listen to the call by dialing (514) 807-9895, or 1 (888)
231-8191. For those unable to participate, a replay will be
available until March 7, 2014. The replay phone number is (514)
807-9274 or 1 (855) 859-2056, access code 6427359.
About Mattel
The Mattel family of companies (NASDAQ: MAT) is the worldwide
leader in the design, manufacture and marketing of toys and family
products. Mattel’s portfolio of best-selling brands includes
Barbie®, the most popular fashion doll ever produced, Hot Wheels®,
Monster High®, American Girl®, Thomas & Friends® and
Fisher-Price® brands, including Little People® and Power Wheels®,
as well as a wide array of entertainment-inspired toy lines. In
2013, Mattel was named one of the "World's Most Ethical Companies"
by Ethisphere Magazine and is also ranked No. 2 on Corporate
Responsibility Magazine's "100 Best Corporate Citizens" list. With
worldwide headquarters in El Segundo, Calif., Mattel’s companies
employ nearly 30,000 people in 40 countries and territories and
sell products in more than 150 nations. At Mattel, we are Creating
the Future of Play. Visit us at www.mattel.com,
www.facebook.com/mattel or www.twitter.com/mattel.
About MEGA Brands
MEGA Brands Inc. is a trusted family of leading global brands in
construction toys, games & puzzles and arts & crafts. They
offer engaging creative experiences for children and families
through innovative, well-designed, affordable and high-quality
products. MEGA Brands includes MEGA Bloks, Rose Art, MEGA Puzzles,
MEGA Games and Board Dudes. Visit http://www.MEGAbrands.com for
more information.
Forward Looking Statements
All statements in this press release that do not directly and
exclusively relate to historical facts constitute forward-looking
statements. Statements relating to the expected benefits of the
proposed transaction and Mattel’s post-transaction plans,
objectives, expectations and intentions are examples of such
forward-looking statements. These forward-looking statements are
based on the current beliefs, expectations and assumptions of
Mattel and MEGA Brands management with respect to future events and
are subject to a number of significant risks, uncertainties and
factors that could cause actual results to differ materially from
those expressed or implied by them, including, without limitation,
uncertainty as to whether and in what timeframe the transaction
will be completed; the risk of failure of either party to meet the
closing conditions set forth in the definitive agreement; the
ability to retain key personnel both before and after the
transaction closes; the extent and timing of regulatory approvals;
ongoing relations between MEGA Brands and its suppliers, customers
and other parties; and costs and other issues with respect to
integrating MEGA Brands, its products and its employees with Mattel
and achieving expected synergies. Additional factors that may cause
results to differ materially from those described in the
forward-looking statements are described in Mattel's periodic
filings with the Securities and Exchange Commission, including the
"Risk Factors" section of Mattel's Annual Report on Form 10-K for
the fiscal year ended December 31, 2013 and Mattel's Quarterly
Reports on Form 10-Q for fiscal year 2014, as well as in Mattel's
other public statements and MEGA Brands public filings with the
Canadian Securities Administrators available at www.sedar.com and
on the MEGA Brands’ website including, in particular, the “Risks
and Uncertainties” section of MEGA Brands Management Discussion and
Analysis (“MD&A”) for the year ended December 31, 2012, and
updated information found in its MD&A for subsequent interim
periods. Readers are cautioned not to place undue reliance on these
forward-looking statements. Neither Mattel nor MEGA Brands updates
forward-looking statements and expressly disclaims any obligation
to do so except as required by applicable law.
1 Construction building sets category is a ~$4 billion category
in mature markets in the U.S. and Europe and growing in emerging
and developing markets. Source: NPD
2 Arts & crafts category is ~$2 billion in mature markets in
the U.S. and Europe. Source: NPD
MAT-CORP
Photos/Multimedia Gallery Available:
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MattelNews MediaDallas Lawrence,
+1-310-252-6397press@mattel.comorMattelSecurities
AnalystsDrew Vollero,
+1-310-252-2703drew.vollero@mattel.comorMEGA BrandsNews
MediaMark Girgis, +1-514-333-5555
x2897mgirgis@megabrands.comorMEGA BrandsSecurities
AnalystsPeter Ferrante, +1-514-333-5555
x2283pferrante@megabrands.com
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