Q: May I have your thoughts on TOY's latest acquisition?
Jim
Jim
5i Research Answer:
TOY has acquired Melissa & Doug, a maker of wooden toys, for US$950M in cash. The deal is immediately accretive to earnings, and adds about US$500M in annual revenue. TOY expects $24M+ in cost saving synergies over the next three years. TOY has cash on hand but debt will increase with the deal, but to a very manageable amount. Total sales will rise by more than 25%, and the deal adds new product lines and we think is a very good complement. Investors have been waiting for TOY to do something with its cash and we think this is a good deal for the company, at a reasonable valuation.