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Analysis: Toys 'R' Us demise could spur merger boom in U.S. toy market


By and Uday Kumar

(Reuters) - The U.S. toy industry looks set for a flurry of mergers and acquisitions between smaller toy makers in the aftermath of the bankruptcy, as they seek more scope and negotiating power with big box retailers and

Smaller toy companies that traditionally relied on as a launch platform to sell and promote products, say it is difficult to develop relationships with mass retailers, which now have the country's biggest toy departments.

They say retailers are increasingly picky about allocating display space, preferring billion dollar well known brands like Mattel's Barbie and and Hasbro's action figures.

"If you're a young brand, it's hard to be found," said Shaun Rein, an with China Group, who covers Asian

"A lot of the smaller niche brands that you'd buy because you'd seen (them) while browsing in are going to be hit very hard."

With Toys 'R' Us out of the picture, has shifted to Walmart, and Amazon, said Jackie Breyer, of The Consolidation helps smaller toy firms get their name out and get products on shelves as they will have a bigger portfolio of products for a to choose from, she added.

The total value of deals in the U.S. toy industry has soared to $962.7 million since Toys 'R' Us filed for bankruptcy on Sept. 19 last year, compared to $85.4 million in the same period a year ago, according to data.

Of the 19 deals in the U.S. toy industry since the bankruptcy, the biggest was Hasbro Inc's $522 million purchase of franchises, including Power Rangers and from Saban Properties LLC, the Los Angeles-based firm credited to have launched the "Mighty Morphin Power Rangers" live-action TV show in 1993.

PlayMonster, the maker of the '5 Second Rule' card game, in February bought Kid O Toys, while Canadian toy-maker bought for about $79 million.

Spin Master declined to comment, while Hasbro said its acquisition was not because of the retailer's bankruptcy. More generally, mergers and acquisitions in the and staples space have racked up their strongest opening to a year since 2008, with more than $216 billion spent globally, according to data. The total value of deals is up 33.6 percent over the same period last year.


Collectible toys maker, The Loyal Subjects' said he has seen an increase in interest since the bankruptcy, and has had at least two pursue his California-based company. Jay of Florida-based said talks of consolidation between his firm and smaller players have "easily tripled" since September.

"Toys 'R' Us is really a huge game changer," said, whose firm bought and since Toys 'R' Us went bust.

The toy retailer's bankruptcy and subsequent liquidation of its over 700 U.S. stores in March was the largest collapse in a year that saw record store closures and a fundamental shift in

"More companies are now questioning, where are the biggest opportunities to sell toys," said Kate Clark, and of bear toy maker, "Unfortunately, some toy companies may struggle greatly and some may not survive."

According to firm NPD Group, U.S. toy sales topped $20 billion last year. and Hasbro together accounted for 25 percent and small players made up as much as 40 percent.

Toys 'R' Us alone had accounted for 12 percent of all toy sales nationwide, according to

But toy sales in the U.S. have been slowing and with Toys 'R' Us gone, toy makers have lost an incubator for new and experimental toys that other retailers were not willing to bet on.

"As an who was starting a toy company, they (Toys 'R' Us) were always the one that were willing to take chances and buy a broader array of products," said Michael Rinzler, of that makes and bears.

Industry observers say that points to the power lying firmly with a handful of big players in the sector. "When you're a smaller sized company ... do you say that maybe it's a better strategy (to) merge with another company or to perhaps to be acquired so that you get more scale?" said Bob Wann, who is the of the in the and the of toy company

"I think more companies will think about considering that than perhaps they did in the past."

(Reporting by and Uday Kumar in Bengaluru; Editing by Bernard Orr)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, May 16 2018. 23:15 IST