Last Updated on January 3, 2020 by Danielle
Billionaire toy executive Isaac Larian along with partner investors bid $890 million for Toys R Us US and Canadian stores, after failing with his GoFundMe #SaveToysRus crowdfunding campaign. Now the future of Toys R Us rests in the hands of the U.S. bankruptcy court.
As Toys R Us winds down its business, the story to save Toys R Us is entering the final chapter. After pledging $200 million and failing to generate the required $1 billion in funding to save Toys R Us with his GoFundMe #SaveToysRUs crowdfunding campaign, billionaire MGA Entertainment toy executive Isaac Larian along with partner investors have formally bid $890 million for 274 U.S and 82 Canadian Toys R Us stores. Time is running out, as liquidation sales have already begun across the 735 Toys R Us locations nationwide with stores expected to close by June or even sooner.
The bid money comes from Larian’s own pockets, investors, and bank financing with $675 million bid for U.S. Toys R Us stores and $215 million for Canada stores. However, this bid will have to be approved by the U.S. bankruptcy court before Larian and his investors can officially acquire the assets.
Twenty percent of MGA Entertainment’s business, which includes brands like Bratz, L.O.L. Surprise! Dolls, and Little Tikes, comes from Toys R Us and the toy industry would suffer greatly with the loss of Toys R Us. Losing Toys R Us could potentially stifle innovation and smaller toy companies could be hurt the most, as Toys R Us was known for taking risks on innovative toys from smaller companies. Some smaller companies could even be forced out of business altogether.
No other big box retailer offers the same experience with aisles and aisles of shelves dedicated to toys, games, and playthings. A staple of American childhood could be in jeopardy. Furthermore, Larian estimates that 130,000 U.S. jobs would be at risk, including 33,000 Toys R Us employees as well as suppliers, distribution centers, and trucking companies tied to Toys R Us’s business. Additionally, Toys R Us’s closure could potentially impact some of the 1,200 jobs at MGA’s Little Tikes plant, which sells roughly forty percent of its products through Toys R Us. Larian said in a statement: “I truly, honestly want to try and save as many jobs as possible.”
Larian’s #SaveToysRUs GoFundMe crowdfunding effort generated only $59,500 from 1,970 backers – which was well short of the ambitious goal of $1 billion. Larian admitted he never thought his social campaign would hit 10-figures, but was satisfied with the outpouring of support from Toys R Us loyalists worldwide. A majority of the donations were under $25. Undoubtedly it was a long-shot and Larian admitted it was a publicity stunt. Some critics had suggested that it was nothing more than a publicity stunt. As part of this effort, he had originally pledged $100 million of his own money in addition to another $100 million from undisclosed investors. Larian had hoped to draw other large investors with the campaign. Since the campaign failed to meet its goal, the funds will reportedly be returned to donors.
In a statement, Larian stated: “The time is now. Toys R Us is like a sick patient in the ICU. If you don’t do a quick heart surgery, the patient is going to die. It’s deteriorating on a daily basis. Every day that goes by, the value of Toys R Us declines and more people lose their jobs. I did my part and now it’s up to the other side to accept this offer. If they do, the real work will begin.”
After years of declining sales, massive debt accumulation, and unable to settle on a restructuring plan with creditors, Toys R Us filed for bankruptcy protection last September. While Amazon, Walmart, and Target also contributed to its demise by capturing marketshare and cannibalizing the business it once dominated, private equity was the biggest reason for Toys R Us’s demise.
Interestingly, Larian is not the only bidder for Toys R Us stores. In fact, the retailer has received multiple bids exceeding $1 billion for its stores in Asia. But for now Larian is only concentrating his efforts on salvaging U.S. and Canadian stores.
Interestingly, other toy companies initially showed interest in supporting Larian’s effort but later backed out. Larian said these public companies failed to think long-term.
Tim Hall, CEO of Simporter, an analytics startup, and former Hasbro executive, pointed out Larian’s bid to save Toys R Us isn’t purely driven by nostalgia. “Isaac is a master of publicity and social media and he has done a wonderful job getting people to try to take this seriously,” Hall said. “He’s a smart business guy and this is a business decision for him. It’s a very credible opportunity.”
“The liquidation of Toys R Us is going to have a long-term effect on the toy business,” Larian said. “The industry will truly suffer. The prospect of bringing the Toys R Us experience to a new generation, my grandson’s generation, is enough to motivate me to save Toys R Us.”
An additional motivator may be that Larian has a soft spot for Toys R Us, as the late company founder, Charles Lazarus gave him his first break some 30 years ago with a new walkie talkie product in 1979.
Although Larian hasn’t revealed specifics regarding how he would operate Toys R Us differently, he has mentioned that he envisions a revamped Toys R Us as a kid-friendly theme park – where kids can play and test out all the latest new toys.
According to the LA Times, Larian has brushed aside doubts on his Toys R Us bid. He has long faced skepticism from toy industry leaders. After he introduced Bratz dolls to market, many were skeptical about the hip dolls with eye shadow and glossy lips – but they went on to become a smash hit, even cannibalizing Mattel’s Barbie sales. In fact, his company’s latest L.O.L. Surprise! Dolls were the fastest-selling toy leading into the 2017 holiday season and the best-selling toy for January 2018, according to The NPD Group.
Larian said, “I like challenges. I have some big, out-of-the-box ideas to save Toys R Us and grow the business if I’m successful in getting Toys R Us assets. If we are successful, I think that in three or four years we’re going to bring Toys R Us back to its glory, and even more.” On the other hand, he said, “If I’m not successful, at least I can say that I did my best.”
Sources: LA Times / The Washington Post
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