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http://www.bloomberg.com/apps/news?pid=10000082&sid=aK4_Irnlym5Q&refer=canada
Mega Bloks to Buy Rose Art Industries for $315 Mln (Update3)
June 15 (Bloomberg) -- Mega Bloks Inc., the world's second- biggest maker
of toy building blocks, agreed to buy Rose Art Industries for $315 million in
cash and stock to enter the arts- and-crafts market. Mega Bloks shares surged 15
percent in the biggest gain ever.
Rose Art, based in Livingston, New Jersey, is a closely held maker of items
such as Fun Dough, Fuzzy color-in posters and Magnetix construction sets.
Montreal-based Mega Bloks said today in a statement it will assume $35 million
in debt held by Rose Art.
The purchase will allow Mega Bloks to add sales of magic markers, crayons and
paint and expand in the U.S. It will also enable Rose Art to sell more of its
color-in posters and Magnetix building sets internationally. Ninety percent of
Rose Art's sales are in the U.S., compared with 57 percent for Mega Bloks.
``We were very focused on the arts and crafts category because we like the size
of it,'' Mega Bloks Chief Executive Marc Bertrand said in an interview. Arts and
crafts items will also help Mega Bloks sell to more girls. The company's
construction toys appeal primarily to boys, he said.
Shares of Mega Bloks surged C$2.30 to C$20.85 at 10:53 a.m. in trading on the
Toronto Stock Exchange. That's the stock's biggest gain since the company sold
shares to the public in May 2002. The stock had fallen 16 percent in the past
year through yesterday.
Financing
The combined company will have sales of more than $520 million and the
acquisition will boost per-share profit 15 percent, excluding cost savings, Mega
Bloks said. Sales rose 6.7 percent last year and net income declined 13 percent
amid higher costs for plastics and sluggish sales in the U.S.
Mega Bloks is financing the acquisition with cash and $20 million of Mega Bloks
common shares at C$19 each.
The company will sell $55 million of shares to help replenish a line of credit
used for the purchase. BMO Nesbitt Burns advised Mega Bloks on the acquisition.
Scotia Capital and BMO Nesbitt will handle the private placement.
Mega Bloks is buying a family-owned company with more than 1,000 employees that
was started in 1923 and is owned by brothers Lawrence and Jeffrey Rosen and
their father Sydney. Mega Bloks competitors include Lego A/S, Europe's largest
toymaker.
Lawrence Rosen will become chief marketing officer for Mega Bloks and Jeffrey
Rosen will serve as executive vice president. Lawrence Rosen will also be
nominated to Mega Bloks' board, according to the statement.
Mega Bloks brands include Block Buddies figures, cars and trucks; ProBuilder
car and military plane sets; and Tiny 'n Tuff construction and racing cars. The
company licenses products for Walt Disney Co. and Marvel Enterprises Inc. It has
more than 1,000 employees and sells in more than 100 countries.
The transaction is expected to close in the third quarter of this year.
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