Hasbro’s takeover offer for rival Mattel, if accepted, would combine the country’s two largest toy manufacturers into a powerhouse company. But despite the obvious commonalities of the two toy companies, the approach still caught some people by surprise.
It’s a deal that makes sense, but not just for the obvious reasons. While adding key Mattel brands like Barbie and Hot Wheels to Hasbro’s lineup, which includes Nerf and key production deals with Disney, will certainly boost the bottom line, there’s more going on here than just strengthening the IP catalog.
Here are a few of the other possible factors behind the deal.
Shelf space
The Toys R Us bankruptcy is having a ripple effect across the toy market industry. Shelf space, which was already at a premium, could be reduced as the fallout from that bankruptcy settles. And competitors like Lego are capturing more and more of the prime shelf real estate. By combining their resources, Hasbro and Mattel could be strong enough to keep smaller competitors at bay on the shelves of major retailers — or, at the very least, pressure them to price toys at a level that gives those competitors a run for their money.
The electronic threat
Kids’ play habits have changed tremendously in the last generation or two. Board games don’t have the appeal of a PlayStation. And the iPad is often more fun than a coloring book or toy cars. While kids still love toys and need them for creative growth, the lure of screens is impacting sales at both companies.
Bargain hunting
Mattel has had a terrible year financially. Toys R US owes it at least $135 million (twice the amount the chain owes Hasbro) and Mattel’s stock has seen prices cut in half this year. Hasbro has long had an interest in acquiring its competitor, making a hostile bid two decades ago. With the stock suffering, it may have simply been an offer that was too good to ignore.