Tech 4 Kids and The Bridge Merge

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Strategic Partnership Aims to Yield Growth and New Opportunities

The toy industry is known for its mergers and acquisitions. They say no one leaves the toy industry—they just move around. One of the main reasons for this is the opportunity for growth. While some companies grow slowly but steadily with a hit here and a hit there, some of the most successful companies in this industry got to where they are via strategic acquisitions or mergers. Toy industry giants such as Mattel, Hasbro, Spin Master, and Jakks Pacific show how vital these moves are to taking a company to the next level.

The first, critical step is finding a complementary, like-minded company with which to merge. Brad Pedersen, president and CEO of Tech 4 Kids, and Jay Foreman, president and CEO of The Bridge Direct, met at toy industry event PlayCon several years ago, where they were introduced by a mutual colleague.

“This is a very social business, and while we all compete in some way, there are always opportunities and synergies that like-minded people can find to make their businesses stronger,” says Pedersen.

This year, Pedersen and Foreman will merge The Bridge Direct and Tech 4 Kids into a new company focused on classic play. The new company will have an entirely new name (yet to be determined), and will be managed in North America and Hong Kong by an experienced team made up of executives from both companies. Foreman will be CEO, and Pedersen will serve as the president of the new company. The head office will be in Boca Raton, Fla., “which has become a micro-hub of the toy industry,” according to Foreman. The company will also continue to operate Tech 4 Kids’ Canadian office, and will consolidate the Hong Kong offices into one operation to maintain and grow that space.

Pedersen says that the companies have already started to integrate the operational side of the businesses, and, over the next 100 to 200 days, plan to merge more functions together to begin to operate as one. While each company will operate out of its respective gallery at the North American International Toy Fair, the companies will come together under one roof at Fall Toy Preview in Dallas this October.

The Bridge Direct and Tech 4 Kids are both traditional toy companies, and the merged company will remain a multi-line traditional toy business, “playing in a variety of product categories both large and small, taking senior as well as ancillary support positions in categories,” says Foreman. “We will look to consolidate product lines where it makes sense, but expect that the combined portfolio will create a much more robust offering for the market. The plan is to merge operational efficiencies but look to continue to grow our existing product lines and expand our portfolio into other high-volume categories. The key will be to offer the trade highly desirable product at great margins and superior value to the consumer.”

The company will continue to offer toys in the impulse collectibles, retro, construction, and activity toy categories, according to Pedersen. “We want to continue to develop and innovate new product concepts to drive organic growth, while at the same time pursue an aggressive acquisition strategy,” he says. “Our strategy is to more fully leverage the complementary distribution channels, develop accretive, parallel channels, and drive acquisitions,” he explains.

So, why now? “This industry continues to change at a rapid pace,” says Foreman. “It’s come to a point where many of the key stakeholders, including retailers, licensors, and vendors are looking to do more business with fewer partners. The overall key motivation for this opportunity is how hard it is to compete in today’s increasingly competitive retail landscape as a sub $50 million company. You simply don’t have the critical mass to compete on a large enough scale and be the best you can be to customers and partners. By scaling up, this opportunity will let us do just that—our weakness becomes our strength.”

“With added scale, we believe we will accelerate the growth of our value proposition for retailers,” adds Pedersen. “Both companies enjoy a good reputation for providing innovative products, driving sales with effective marketing, shipping on time, and delivering good margins. We will deliver on a more meaningful basis all the things our customers are looking for in a partner.”

While the new company has no plans for an IPO in the near future, there will be an opportunity for private equity firms. “We will become a new strategic player in the business for financial firms that have invested in small to mid-size toy companies,” says Pedersen.

In the near-term, Foreman says the main focus is on a smooth integration and seamless transition for the companies’ partners. Once the company is on solid footing, the door will be open for acquisitions of smaller cap toy companies, with the goal of merging with or acquiring a new company every six to 18 months.

For Pedersen and Foreman, this is the first step toward an even bigger future. “The new combined company will put us in the top 30 toy manufacturers, globally,” says Pedersen. “In less than three years we expect to be in the top 15, and in five years, we will be in the top 10!”

Eight Reasons Why Pokémon Go Is Succeeding Where Toys Have Failed

20160706012433!Pokemon_GoIf you haven’t noticed the runaway success of Pokémon Go this past week, you’re living under a rock. Look outside—all those people looking at their phones, glancing around, and walking slowly into traffic (hopefully not) are playing the hottest new augmented reality (AR) game. The word on the street is that this is the future of gaming. Perhaps it is. But it’s certainly not the first augmented reality game. The toy industry has been taking shots at this category for years with little to no success. At Toy Fair 2012, WowWee introduced its App Gear line. [Read more...]

Adult Coloring Impact Extends Beyond Toy Industry

unnamed-1The adult crafting trend is carving out new opportunities for the office supplies industry, according to Adult Coloring, Crafting, and the Handmade Movement: An NPD Office Supplies Industry Report, from global information company The NPD Group.

Coloring and art supplies are a $1 billion market, with in-store and online sales growing to $75 million combined in 2015. In the arts and crafts paper category, coloring pages, including adult coloring books, is the largest segment based on dollar volume, also seeing the largest store dollar growth in 2015. With paint nights and adult coloring gaining in popularity, sales of complementary products such as colored pencils, gel, and porous pens, painting accessories, and acrylic paint are driving growth within their respective categories.

Chalk and chalkboard usage is also influencing industry sales, as these items are increasingly used not only for school, but for businesses, home offices, and home décor. The chalk category saw the largest in-store dollar sales increase in 2015, surpassing crayons. Both dollar and unit sales for chalkboards more than doubled in 2015 compared to the prior year.

NBCUniversal Acquires DreamWorks Animation

NBCUniversal, a division of Comcast Corporation, announced the acquisition of DreamWorks Animation. The studio will become part of the Universal Filmed Entertainment Group, which includes Universal Pictures, Fandango, and NBCUniversal Brand Development.

Under the terms of the agreement, DreamWorks Animation has an equity value of approximately $3.8 billion. DreamWorks Animation stockholders will receive $41 in cash for each share of DreamWorks Animation common stock. The agreement has been approved by the boards of directors of DreamWorks Animation and Comcast, and the controlling shareholder of DreamWorks Animation has approved the agreement by written consent.   [Read more...]

Moose Toys Awarded Partner Award of Excellence by Target

Moose Toys received the 2015 Partner Award of Excellence from Target retailers. The award acknowledges the company for their innovative leadership and good business practices.

For Moose Toys, the award completes the trifecta of honors from leading retailer partners in the U.S. In February, the company received the Toy Supplier of the Year award from Walmart, and the Vendor of the Year award from Toys “R” Us.

Moose Toys’ most popular products over the years include Shopkins, The Trash Pack, and Mighty Beans. They also won the Toy Industry Association’s Girl Toyof the Year award two years in a row for Shopkins. The company continues to grow its portfolio with brands such as Little Live Pets, Beados, and Qixels.

Toy State Introduces New Line of TMNT Vehicles

unnamedToy State secured a licensing partnership with Nickelodeon Viacom Consumer Products (NVCP) to design, develop, and manufacture lines of toy vehicles featuring the Teenage Mutant Ninja Turtles brand.

The two-year deal will allow Toy State to create Teenage Mutant Ninja Turtles-themed vehicles that will be available this summer at major retailers across the EMEA region.

Toy State also recently added Barbie to its licensing portfolio, joining the company’s flagship Road Rippers and Nikko brands, as well as lines featuring licensed properties including Hot Wheels, Caterpillar, WWE, Thomas & Friends, and DC Super Friends.

Spin Master Expands Global Presence with Australian Subsidiary

Spin Master Corp. is forming an Australian subsidiary Spin Master Australia (Pty) Ltd. Spin Master Australia will begin trading in 2017 and will assume distribution for the majority of the company’s brands for Australia.

Based on NPD data, Spin Master was the fourth largest toy, games, and entertainment company in North America in 2015 and ranks in the top 10 globally based on Euromonitor data.

Spin Master has distributed product in Australia and New Zealand for over 15 years. Overseeing business operations will be Jacqui Webster, recently appointed as general manager, Australia and New Zealand, reporting into Derek Seidewand, vice president, International Sales. Prior to joining Spin Master, Webster held senior roles with Hasbro, Mattel, Paramount Pictures, and several international consumer packaged goods companies.

Spin Master Australia will be based in Sydney, NSW, and a warehouse location will be finalized in the coming months.

UNESCO and CJ E&M Partner to Support Girls’ Education Global Campaign

rainbow rubyCJ E&M, an Asian content and media company, and UNESCO, the United Nations Educational, Scientific, and Cultural Organization, have partnered to support UNESCO’s girls’ education global campaign with Rainbow Ruby, CJ E&M’s new preschool animation series. [Read more...]

Statement from Tech 4 Kids on Passing of Elise Lachowyn

Tech 4 Kids announced the sudden passing of Elise Lachowyn on Friday, February 12. Elise was involved in a tragic accident in New York City on her way to North American International Toy Fair.

Lachowyn leaves behind her husband Drew and 6-year-old daughter, Skyler. Lachowyn was a veteran of the toy industry and a friend and colleague to many.  As a member of the senior leadership team of Tech 4 Kids, Elise was a highly respected, admired, and accomplished individual who will be greatly missed by all.

In loving memory of Elise Lachowyn, Tech 4 Kids has set up a trust fund for Skyler and will be matching all donations.

 

VTech to Acquire LeapFrog in $72 Million Deal

VtechLFVTech will acquire 100 percent of the outstanding common stock of LeapFrog through an all-cash tender offer followed by a second-step merger. In the tender offer, VTech will offer LeapFrog investors $1.00 per share for LeapFrog’s Class A and Class B shares, which represents a 75.4 percent premium over the closing price of LeapFrog’s Class A shares on February 4, 2016. The total purchase consideration amounts to approximately $72 million. VTech will fund the tender offer through internal resources.

The tender offer will commence on or around March 3, 2016, and will be open for a minimum of 20 business days. The closing of the transaction is subject to satisfaction of certain conditions set forth in the merger agreement, which has been unanimously approved by the Boards of Directors of both companies. LeapFrog’s Board has agreed to unanimously recommend to its stockholders that they tender their shares of LeapFrog common stock pursuant to the tender offer. [Read more...]