Mattel Acquires "Thomas the Tank Engine" Parent Company "Hit Entertainment"

From C21 Media:
Mattel confirms $680m Hit buy-out

Toy giant Mattel has confirmed that it will acquire Thomas the Tank Engine parent Hit Entertainment for US$680m.

The deal brings to an end Hit's search for a new owner after current parent Apax Partners put it on the block last year.

The auction process had included Saban Brands, Disney and Mattel rival Tomy, with the Thomas brand (aka Thomas & Friends) the key driver for potential owners, but Mattel has won out.

Mattel's chairman and CEO Robert Eckert paid tribute to Thomas & Friends and said his company was "the right place for it."

"Thomas & Friends routinely ranks among the world's leading preschool toys. Additionally, with more than half of the Thomas & Friends revenue generated from non-toy products, this transaction will marry Mattel's global marketing, distribution and brand management capabilities with Hit Entertainment's global programming and licensing expertise to accelerate growth of the combined portfolio," Eckert added.

The deal is expected to be financed by a combination of cash and debt and will close in the first quarter of 2012.

Hit's other assets, which include Bob the Builder, Angelina Ballerina and Barnet, will now pool together with Mattel's Barbie, Hot Wheels and Fisher Price.

Hit president and CEO Jeffrey Dunn said Mattel would be a "wonderful steward" for the company's assets. "Hit Entertainment owns some of the most loved and trusted preschool brands in the world, and under Mattel's leadership, I look forward to seeing them grow to even greater heights," he added.

The transaction is subject to antitrust clearance and other customary closing conditions.

Private equity firm Apax has been seeking a buyer for Hit, which is among the world's biggest kids' IP firms but has been saddled with debts for some time. Early estimates in the bidding process suggested it could have fetched up to US$1.5bn.

Apax originally acquired the firm in 2005 for £489m (US$779m) but had to write down Hit's value by US$500m in 2010 after debts reportedly reached more than US$400m. Despite this, Hit - and especially Thomas - remained profitable.

RBC Capital Markets acted as financial advisor and Latham & Watkins as legal advisor to Mattel. BofA Merrill Lynch acted as Hit's financial advisor and Weil, Gotshal & Manges as legal advisor.

Jesse Whittock
24 Oct 2011
© C21 Media 2011

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