L Catterton Makes Acquisition Offer for Mattel, Sparking Interest from Rival Hasbro

L Catterton, the private equity firm backed by luxury goods giant LVMH, has made an acquisition offer to Mattel, the iconic toy maker known for Barbie and Hot Wheels, according to sources familiar with the matter. This move has the potential to ignite a bidding war, with rival Hasbro also considering entering the fray.

Following the Reuters report of L Catterton’s approach, Mattel shares surged 20% to $19.49, giving the company a market value of $6.5 billion. Hasbro shares also rose by 4% to $61.25. Hasbro and Mattel have previously engaged in unsuccessful merger talks, but the news of L Catterton’s interest may prompt Hasbro to reevaluate its position.

Mattel has faced challenges in recent years, despite the success of the Barbie movie released last year. The company’s shares had lost 23% of their value over the past year due to concerns about profitability and the handling of unprofitable toy franchises. However, Mattel posted a smaller-than-expected loss for the first quarter in April, aided by cost-cutting measures despite weak sales.

Activist investor Barington Capital called on Mattel in February to explore strategic changes, including potential options for its Fisher-Price and American Girl brands and the separation of CEO and chairman roles. These pressures may have influenced the company’s openness to acquisition offers.

L Catterton, which manages $34 billion in assets, has a history of investing in consumer brands, having made over 250 investments since its inception in 1989. In 2016, the firm partnered with LVMH and the family office of LVMH CEO Bernard Arnault, selling a stake to them. This backing could provide L Catterton with the resources and strategic support needed to pursue a significant acquisition like Mattel.

Hasbro, known for brands like Play-Doh and Transformers, reported a smaller-than-expected drop in first-quarter sales in April and exceeded profit estimates, thanks to leaner inventories and steady digital gaming revenue. The company has also focused on its most profitable brands, selling its eOne film and TV studio to Lions Gate Entertainment for about $500 million last year.

A merger between Mattel and Hasbro has long been speculated as a move that could unlock significant value, though it would likely face substantial antitrust scrutiny. The two companies already have a partnership agreement to create co-branded toys and games, including Barbie-branded Monopoly games and Transformers-branded UNO games.

In a bid to remain relevant and inclusive, Mattel recently introduced the first-ever blind Barbie doll, developed in partnership with the American Foundation for the Blind. The doll features a white and red cane, sunglasses, and clothes designed with tactile fabrics and braille packaging, furthering Mattel’s commitment to diversity and representation.

Mattel also topped Wall Street estimates for second-quarter profit, reporting an adjusted profit of 19 cents per share, beating the expected 17 cents. The company has set a target of saving $200 million in costs by 2026 through streamlining its supply chain and exiting or out-licensing underperforming product lines.

As the toy industry giants navigate this evolving landscape, the potential acquisition of Mattel by L Catterton, and the possible entry of Hasbro into the bidding, could reshape the market and redefine the future of these iconic brands.

Gerald Foster
Financial Desk