Spin Master buying Melissa & Doug for US$950 million

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Business Matters: Spin Master is buying Melissa & Doug for US$950 million
WATCH ABOVE: Spin Master Corp. announced a deal on Wednesday to buy U.S.-based toy company Melissa & Doug for US$950 million in cash. Spin Master is best known for its Paw Patrol and Rubik’s Cube brands. Kyle Benning has more on this as well as Canadian grocers calling for a pause in milk prices and Exxon Mobil doubling down on fossil fuels as energy prices surge – Oct 11, 2023

TORONTO — Spin Master Corp. announced a deal on Wednesday to buy U.S.-based toy company Melissa & Doug for US$950 million in cash.

Spin Master chief executive Max Rangel said Melissa & Doug is a trusted brand of early childhood toys with an evergreen portfolio that will expand the company’s reach and help grow revenue.

“The acquisition of Melissa & Doug represents a significant step forward in our growth strategy and will help support our vision to reimagine everyday play,” Rangel told a news conference on Wednesday.

He said the acquisition will be an important portfolio brand within Spin Master’s infant, preschool toddler group.

“Melissa & Doug is a very strategically compelling acquisition for us and the largest in our history, with the potential to immediately accelerate our growth with approximately $490 million in net sales, which they did in 2022.”

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Spin Master is best known for its Paw Patrol, Bakugan, Hatchimals, Rubik’s Cube and Gund brands.

It said the deal to buy Melissa & Doug will add a trusted brand of high-quality open-ended, creative and developmental toys that is relevant for parents seeking sustainable wooden toys and screen-free play.

Rangel said the Wilton, Conn.-based company, Melissa & Doug, will continue to operate as a stand-alone business with Fernando Merce as its CEO.

“We are committed to preserving the essence of what Melissa & Doug represents for families and continuing to operate it as a stand-alone company while working together to inspire more children through the magic of play,” Rangel said in an email.

National Bank of Canada analyst Adam Shine said in his note the acquisition is expected to be immediately accretive to Spin Master’s earnings per share in 2024.

“It’s a highly recommended brand with strong consumer loyalty and has achieved sustained (point of sale) performance ahead of the overall toy market over the past five years,” he said in a note to clients.

Melissa & Doug had US$489 million in revenue last year, according to Shine, and generates about 75 per cent of its sales from toys launched in 2017 or earlier. It has 600 employees.

Shine said Spin Master is expected to see immediate growth opportunities through e-commerce and international expansion while focusing on growing Melissa & Doug’s core evergreen product line.

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The company is also going to explore adjacent categories like baby and toddler products, with future plans to expand into areas like publishing.

Spin Master said it plans to finance the purchase price with about $450 million in balance sheet cash and $500 million in debt financing.

The agreement also includes up to an additional US$150 million that is subject to achieving certain financial targets for 2024 and 2025.

Earlier this month, Spin Master announced an agreement for the global toy licence for Dora, the new reboot of the Dora the Explorer franchise coming next year.

The new Dora toy collection is expected to launch in the fall of 2024 and include figures, dolls, playsets, vehicles, plush, role-play, games and puzzles, inspired by Dora, her companion Boots and other characters.

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