Mattel Rejects New MGA Entertainment Merger Offer

Mattel MGA Merger
Mattel booth at the 2018 San Diego Comic-Con International at the San Diego Convention Center in San Diego, California (Photo: Flickr.com / Gage Skidmore)

American toy manufacturer Mattel Inc announced this week that it had once again rejected an unsolicited merger offer from its rival MGA Entertainment. The California-based company received a second revised offer from MGA, who had been trying to merge the companies since last year.

According to the MGA founder and chief executive Isaac Larian, his company had renewed its offer to Mattel after it had sought to merge with the company over a year ago. Larian claims that since it had made its first offer, Mattel has not been doing very well financially and a merger could likely be a reasonable strategic move for the company.

Larian pointed out in an interview earlier in the week that Mattel is simply not delivering its promises to shareholders and this can clearly be seen by its results.

Mattel, the company that made the iconic Barbie doll, Hot Wheels Cars, and American Girl dolls, have not made their financial results public. However, Larian revealed that its sales are definitely much higher as it topped $2 billion last year. MGA owns popular toy brands such as Bratz dolls, LOL Surprise, and Little Tikes.

When asked about its offer to merge with Mattel, Larian explained that the exact price would need to be determined by an investment bank or other outside parties.

The executive did clarify that it would definitely be more than Mattel's current market valuation. As of this week, Mattel is currently sitting at a market valuation of around $3.7 billion.

MGA's latest merger offer did include some conditions that would have to be met before it can proceed. MGA conditioned that Larian would have to be named CEO of the new company and that all of Mattel's directors be removed "without compensation."

Mattel responded to the offer by stating that it had unanimously decided to reject the proposal on grounds that it was not in the best interest of its shareholders. The company's directors also revealed that they are not interested in any further discussion on the matter.

Following the news, Mattel stocks fell by as much as 2.3 percent to $10.81 per share. Over the past twelve months, the company's stocks have dropped by about 37 percent. Mattel's stocks had reached a high of $40 per share in 2014.

In its earnings report for 2018, Mattel reported a loss of around $531 million on its sales of around $4.5 billion. Despite its falling stock prices, Mattel executives have promised investors a massive turnaround, which will be led by the expansion of its entertainment and digital businesses. The company also plans to initiate a cost-cutting strategy that will apparently save the company around $650 million.

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