Last Updated on December 26, 2019 by Danielle
After having his bid rejected by the court, billionaire toy executive Isaac Larian shifts his focus to U.S. Toys R Us stores and could sweeten the deal.
MGA Entertainment’s CEO, Isaac Larian, is now shifting his focus solely on U.S. Toys R Us stores, after having his $890 million bid rejected for 274 U.S. stores and 82 Canadian operations.
He plans on sweetening the deal for the U.S. stores now that Prem Watsa, billionaire owner of Fairfax Financial Holdings Ltd., reached a tentative deal to buy the Canadian operations for $237 million.
Larian had bid $215 million for the Canadian operations earlier this month. Although he could have bid higher in the auction, he did not do so out of respect for Watsa, who he sees as a Canadian Warren Buffett.
On Sunday Larian spoke with Toys R Us bankruptcy advisors and stated he will concentrate his efforts on U.S. stores. Larian said in regards to the adviser conversations: “I think they were genuinely serious about wanting to help me save what I can. I am optimistic.”
Larian and his investors’ bid of $675 million for 274 U.S. Toys R Us stores was deemed to be inadequate and therefore rejected by the U.S. Bankruptcy Court.
Larian and his team reportedly will reassess the value of the stores as well as Toys R Us intellectual property he seeks to acquire. He contends that because Toys R Us is in the process of liquidating, it is progressively devaluing the chain.
Toys R Us is a major sales channel for toy companies and the industry. In fact, Toys R Us accounts for roughly 20 percent of MGA Entertainment’s business. MGA is known for their hit toys L.O.L. Surprise! Dolls and Little Tikes. Toys R Us generates roughly 15 to 20 percent of revenue for the industry.
Many point to the 2007 leveraged buyout as the downfall of Toys R Us, as its owners piled on $5 billion in debt. This coupled with increased competition from Walmart and Target along with online competition from Amazon contributed to its demise.
According to Larian’s estimates, 130,000 U.S. jobs are at stake if Toys R Us disappears altogether. This includes Toys R Us employees, suppliers, distribution centers, trucking firms, and other firms with business relations with Toys R Us. Since 40 percent of Little Tikes products are sold through Toys R Us, that could impact some of Larian’s 1,200 employees at the Ohio plant.
Recently, it was announced that Smyths Toys will purchase Toys R Us stores in Germany, Austria, and Switzerland. Smyths will add 90 stores to its network of 110 stores, effectively doubling its size. Toys R Us’s attorneys have stated that the company has been offered multiple bids exceeding $1 billion for its Asian stores.
Last month Larian spearheaded a GoFundMe #SaveToysRUs crowdfunding campaign to raise $1 billion in funding to save Toys R Us. However, the campaign failed, raising under $100,000 from donors. Larian and undisclosed investors had contributed $200 million to jump-start the campaign. Larian admitted he never actually thought they would achieve the ambitious goal and said it was in fact a publicity stunt.
Larian’s $890 million bid for Toys R Us came from his own pockets, investors, and bank financing as a last-ditch effort to salvage Toys R Us. MGA Entertainment is not affiliated with the deal. Larian hinted that, if given an opportunity, he would transform Toys R Us into a mini-Disneyland, where kids could play and test out all the latest toys.
Although Larian hasn’t given specifics as to how he would finance a better deal, he is determined to save Toys R Us. In addition to saving as many jobs as he can, Larian genuinely wants to save Toys R Us for future generations. He said, “Toys R Us, to me, is an American icon. I look forward to 100 years from now when nobody will know who the hell Isaac Larian was. ‘He came up with L.O.L. Surprise! Dolls, Little Tikes, and Bratz’ – nobody is going to remember that.”
“What they are going to remember is ‘He was the guy who saved Toys R Us.’ I hope so, anyway. Maybe I’m a dreamer, I don’t know,” Larian said in a statement.
Source: LA Times