Mattel shares bounce on takeover speculation

NEW YORK – 31 October 2017: Mattel shares bounced Monday after last week's bruising earnings performance, boosted by an analyst report that said the US toy giant could be a takeover target.

Shares surged 10.8 percent in afternoon trading Monday to $15.51, rallying as a note from BMO Capital Markets said Mattel could be taken over by a variety of players, including Disney or another "entertainment conglomerate."

"We think investors can (start) looking at Mattel from a sale of the company perspective or breakup value," BMO said, alluding to a huge drop in valuation over the last year.

"We believe its brands and manufacturing footprint could be worth more than $10 billion in their current state."

The 72-year-old maker of Barbie, Thomas & Friends and other well-known toys has been in free fall for most of 2017, and Friday reported a sharp fall in third-quarter revenues due in part to the hit from the Toys "R" Us bankruptcy.

Shares finished down 8.9 percent on Friday after Mattel reported a quarterly loss, and said it suffered sales declines in virtually every major product category and unveiled plans to cut $650 million in costs and suspend the dividend.

BMO, which kept its "outperform" rating on Mattel, praised the plans of new chief executive Margo Georgiadis, who wants to pare back the toymaker's manufacturing presence and pump additional funds into digital capabilities, gaming and emerging markets.

"This is an entirely new management team, with no pre-conceived notions nor emotional ties to existing programs, processes or protocols," BMO said. "Sacred cows will be slayed."

BMO said possible acquirers could include long-time rival toymaker Hasbro. Such a deal might face fewer antitrust roadblocks than in years past because of the growth of Lego, Spin Master and MGA Entertainment..

The list of entertainment companies that could see value in all or part of Mattel includes Viacom, Disney or Time Warner, BMO said.