Barbie meets My Tiny Pony: Why Hasbro might purchase Mattel

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Source:   —  November 14, 2017, at 1:07 PM

Will Barbie soon have her own My Tiny Pony? Could there be Hot Wheels versions of Tonka trucks?.

Barbie meets My Tiny Pony: Why Hasbro might purchase Mattel

Will Barbie soon have her own My Tiny Pony? Could there be Hot Wheels versions of Tonka trucks?

It may happen if the rumors of a mega toy merger between Mattel and Hasbro arrive true.

Mattel (MAT) shares surged more than twenty percent on Monday after The Wall Str Journal suggested late Friday that Hasbro was considering a takeover proposal for its struggling rival. Hasbro's (HAS) stock popped nearly six%.

Mattel'south stock rose five percent more Tuesday while Hasbro was flat. Hasbro had number comment on the takeover talk. Mattel wasn't immediately available for comment.

A deal would unite Hasbro, the owner of Mr. Potato Head, Monopoly, Tonka, My Tiny Pony and most Disney toy licenses, with Mattel, the parent of Fisher-Price, Thomas and Friends, Barbie and Hot Wheels.

Why might a deal create sense? Hasbro is operating from a position of strength. Its stock is up about twenty-five percent this year. Analysts expect Hasbro'south earnings will increase twelve percent this year and that sales will rise nearly seven%.

Simply put, Hasbro has the toys that kids want -- and it could scoop up Mattel on the cheap.

That'south because Mattel, which lost the Disney (DIS) license -- most notably the profitable line of Princess dolls and "Frozen" toys -- to Hasbro in two thousand-sixteenth, has been in a tailspin.

Profits have been falling as sales have slid. The company even suspended its dividend to shareholders latest mo after its latest bleak earnings report.

Related: Barbie'south first hijab

Mattel brought in a new CEO, former Google (GOOGL, Tech30) executive Margo Georgiadis, earlier this year to focus more on high-tech toys. But that's not stopped the bleeding. Even with the stock'south recent rumor-fueled gains, Mattel shares are down thirty-three percent this year.

Another possible reason for a toy tie-up: Both companies could've a disappointing holiday season and a tough two thousand eighteen because of the bankruptcy of Toys 'R' Us. A combination could give the two companies more influence with other stores that sell their toys.

Hasbro and Mattel each warned latest mo that fourth-quarter results won't be as powerful as previously thought because of the troubles facing Toys 'R' Us. That'south also a key reason why Hasbro'south stock, despite the impressive gain this year, is down seventeen percent from its 52-week high.

Hasbro'south earnings and sales growth are expected to unhurried following year, and Wall Str is forecasting yet another decline in income for Mattel in two thousand-eighteenth. The two companies could arguably do better if they were united.

Still, it remains to be seen whether Mattel wants to be acquired -- and, if it did, whether antitrust regulators would authorize such a deal.

Related: Hasbro damage by Toys 'R' Us bankruptcy

Mattel tried to purchase Hasbro once before, in one thousand nine hundred ninety-sixth, but Hasbro turned the proposal down, citing concerns that the companies would've to sell several brands to obtain government approval.

Regulators could still argue today that a Hasbro-Mattel deal could create a monopoly -- the real-life kind -- but executive might authorize the merger to pass Go this time around.

That'south because the all toy industry has been struggling.

Many kids prefer to play video games on Nintendo (NTDOY), Microsoft (MSFT, Tech30) and Sony (SNE) consoles, or on apps. The digital world hurting old-fashioned toy makers.

The rise of Amazon (AMZN, Tech30) and Walmart (WMT) -- both of whom pride themselves on offering deep discounts -- may also be hurting traditional toy companies. Their increased influence makes it tougher for toy companies to sell their products at a premium price.

Not even the mighty Lego is immune. The maker of the plastic toy bricks posted a astonishment drop in sales in Sept and announced layoffs, too.

Shares of smaller toy companies Jakks Pacific (JAKK) and Canada'south Spin Master, which makes Hatchimals toys, have been hit in the past month, too, because of concerns about the Toys 'R' Us bankruptcy.

So while a Hasbro-Mattel may not have made sense twenty years ago, the timing might be right now.

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