by George Halim
The battle of the blocks is on.
Mattel, Inc. has a deal in place to buy Canadian toy giant MEGA Brands, Inc. for $460 million.
“This is something we’ve been working on for some time,” said Mattel CEO Brian Stockton in a corporate webcast.
Mattel Chief Financial Officer Kevin Farr said the company is looking forward to expanding in two of the fastest growing toy products – construction sets and arts and crafts.
“We plan to meaningfully improve the company’s growth in the long term,” said Farr. “We have lots of work to do, but we see this as a great opportunity to combine… an even stronger number two [in construction sets].”
Montreal-based Mega Brands CEO Mark Bertrand said “international expansion is a key driver” in this deal, and it’s happening at the right time for his company.
“Our people and brand have exciting growth opportunities, and we are joining a great organization, one of the world’s most ethical companies,” Bertrand said. “There is no better partner for the future.”
According to Bertrand, Mattel plans to treat Mega Brands the same way it treated Fisher Price after their purchase of the toy company in 1993.
“Mattel recognizes our sizeable position and sees longer term growth.”
– Mark Bertrand, Mega Brands CEO
Fisher Price’s main office is in Buffalo, N.Y., with most operations still running out of that location.
The U.S.-based company doesn’t intend to transfer jobs or production away from Montreal.
“Mattel plans to leave the company in its place and leave it with a high degree of independence,” Bertrand said.
Globe and Mail Business Analyst in the Montreal Bureau Bert Marotte said the “golden goose” in all of this is the top of the line Mega Brands plant.
“The plant in Montreal is a big reason,” said Marotte. “It’s state of the art and it’s cheaper.”
Mattel doesn’t plan on jeopardizing any jobs, in fact Marotte says it could be the opposite.
“They’re taking this on with the view of growth and expansion, and you could actually see jobs being added in Montreal.”
Stockton said it was a friendly takeover, and he’s looking forward to expanding internationally in a move that benefits both parties.
“This is a company that has high growth margins like Barbies,” Stockton said. “I would argue that Canada is a high cost place to do business… but they have a very good group of talent, great facilities.”
The transaction comes a day after rival Lego said full-year revenue advanced 10 per cent with growth in all major markets.
Lego currently has leverage in construction set toy products worldwide, with their nearest competitor, Mattel, a distant second.
With the acquisition of Mega Brands, the maker of Mega Bloks, building blocks generally made for pre-schoolers, Mattel will gain some ground on Lego.