Mattel acquires HIT Entertainment for $680 million

MUMBAI: Mattel, Inc. has entered into an agreement to acquire HIT Entertainment for $680 million in cash from a consortium led by Apax Partners funds.

HIT Entertainment owns a global portfolio of popular preschool brands, including Thomas & Friends, Barney, Bob the Builder, Fireman Sam and Angelina Ballerina. With more than $180 million of revenues, HIT Entertainment represents one of the largest independent owners of preschool intellectual property. The purchase price equates to a multiple of about 9 ½ times trailing earnings before interest, tax, depreciation and amortization.

“Mattel is the right home for Thomas & Friends. This powerhouse brand is joining the ranks of such iconic brands as Barbie, Hot Wheels, Fisher-Price and American Girl. Thomas & Friends routinely ranks among the world’s leading preschool toys. Additionally, with more than half of the Thomas & Friends revenue generated from non-toy products, this transaction will marry Mattel’s global marketing, distribution and brand management capabilities with HIT Entertainment’s global programming and licensing expertise to accelerate growth of the combined portfolio,” said Mattel chairman and CEO Robert A. Eckert.

“HIT Entertainment owns some of the most loved and trusted preschool brands in the world and under Mattel’s leadership, I look forward to seeing them grow to even greater heights. Mattel is a wonderful steward of brands and a great home for the outstanding properties HIT has developed and grown, including Thomas & Friends. It is fitting that the world’s premier toy company should become the owner of the world’s premier pre-school property,” said HIT Entertainment president and CEO Jeffrey D. Dunn.

Irina Hemmers, a partner in the Apax Media team, said, “We are very pleased that this strong portfolio of iconic brands will continue to flourish in the hands of Mattel. Fisher-Price already produces HIT’s toys under license so the two companies know each other well and there is considerable industrial logic in this combination. I would like to thank the employees and the management team for ensuring that HIT’s brands achieved their leading global position in the preschool character space. We wish the whole company every success for the future.”

The transaction is expected to be financed with a combination of cash and debt and is expected to close in the first quarter of 2012. The transaction is not expected to have a material impact on Mattel’s 2012 earnings, but is expected to be increasingly accretive as the benefits of owning these brands are reflected in Mattel’s results, including the addition of Thomas & Friends wood business in 2013 and retention of Thomas & Friends plastic and die-cast business from 2015 onwards.

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