paraphrasing Dirty DancingLeaves no Barbie in the corner. except perhaps Hasbro, who wants to acquire Mattel, maker of the famous doll. That would bring together brands such as Disney Princesses and Star Wars, Hasbro, Fisher-Price, Mattel, among many others. Both companies will have to overcome decades of enmity, but external enemies are worse.
Since Mattel made a hostile bid for Hasbro in 1996, many things have changed. Mattel is now clearly the smallest and least profitable of the two. And antitrust concerns Hasbro Mattel used to repel now seem almost quaint. The children's entertainment options have exploded, and it is hard to imagine that a combined share of 50% market share of dolls, which has barely grown over the last decade, is a great threat to anyone.
The companies operate in different ways, but that may mean that there is room to save costs. Mattel, for example, makes about half of its own toys, and has a six times higher than that of Hasbro, which subcontracts the manufacturing workforce. The American Girl brand Mattel also has its own retail stores. The strategy, relatively rich in assets, is not working. Its shares have fallen by half in one year.
The head, Margo Giorgiadis, filed earlier this year by Google, has a plan to cut costs equivalent to 10% of sales. Say Hasbro, which has much higher operating margins, can cut 50% of that: additional 250 million a year. Capitalized audited and would create a value of 3,400 million, which would cover spare a premium of 30% on the market value of Mattel before the news, 4.800 million.
Fights in the drawer of toys are the major obstacle. Hasbro snatched at the time brands such as Sesame Street and Disney Princesses Mattel. Some franchises have done the opposite way. Marvel or DC, who have contracts with Mattel could complain. However, the bankruptcy of Toys R Us shows that there are worse enemies, like Amazon and Wal-Mart. It is better to leave behind childish disputes.
The authors are columnists Reuters Breakingviews. The opinions are yours. Translation of Carlos Gómez AbajoIt is the responsibility of Five days.