Mattel acquires Hit Entertainment for $680 mn

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

The acquisition does not include Hit Entertainment‘s interest in the cable network station, Sprout.

Hit Entertainment owns a global portfolio of pre-school brands, including Thomas and 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 pre-school intellectual property. The purchase price equates to a multiple of about 9 ? times trailing earnings before interest, tax, depreciation and amortization.

Mattel chairman, CEO Robert A. Eckert said, "Mattel is the right home for Thomas and Friends. This powerhouse brand is joining the ranks of such iconic brands as Barbie, Hot Wheels, Fisher-Price and American Girl. With more than half of the Thomas and 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."

Thomas and Friends is the premier brand in the HIT Entertainment portfolio. Created more than 65 years ago, the brand has grown into the top licensed pre-school property in the world, with television programming, home entertainment products, toys and other consumer products available throughout the globe.

Mattel currently markets many Thomas and Friends toy products under a license from Hit Entertainment which extends through 2014.

Mattel‘s global sales of Thomas and Friends die-cast and plastic toys are more than $150 million, and Mattel believes that this transaction will allow the company to continue to expand and grow these product lines into the foreseeable future.

Another key advantage to the acquisition is that Mattel will be able to reunite two key pieces of the Thomas and Friends toy business: plastic and die-cast toys with the wood-based business. The current wood license expires at the end of 2012, at which time Mattel expects to add that line of business to its portfolio. Historically, the sales of wood-based toys have been around half the size of the plastic and die-cast business.

The Hit Entertainment portfolio also includes a number of other pre-school brands with established television broadcast and licensing relationships around the world.

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 and Friends plastic and die-cast business from 2015 onwards.