Analysts predict a sell-off of more than 100 stores, noting that the company's real estate can be as valuable as its toy business. Such sales could leave some of this region's more valuable retail real estate up for grabs. Toys R Us operates about 20 stores in the region, many in prime shopping corridors.
"The hidden value of Toys R Us is in its real estate," said Steven B. Greenberg, president of the Greenberg Group, which advises retailers on real estate. Toys R Us owns about half of its stores -- a high percentage -- and pays relatively low rents for the rest, making the properties ripe for resale or re-leasing, Greenberg said.
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But Eyler said the winning bidders' final price reflected their interest in the Toys R Us business, not merely in its real estate. Competing alliances, which offered lower bids, had focused on the value of Toys R Us after "spitting out the pieces" and capitalizing on the land and leases it controls, he said.
Those competing bidders "looked at the asset values," Eyler said. "The KKR team looked at the future of the business."
Spokesmen for the three investment groups declined to comment on the acquisition beyond their official public statements. It is not clear if the new owners intend to keep Toys R Us as a public company or take it private. The acquisition price amounted to $26.75 a share and included a takeover of the company's outstanding debt.
Toys R Us closed yesterday up 1 percent, at $26.
People close to the deal said the investors emerged as natural allies because each brought different strengths.
Vornado is among the largest real estate owners in the country, with deep expertise in acquiring and selling retail space or converting it to other more lucrative uses.
KKR, a longtime client of Toys R Us adviser Credit Suisse First Boston, is among the largest private equity firms in the nation and could take the lead in structuring an expected initial public offering of the Babies R Us franchise.
Bain is viewed as having strong expertise in improving managerial operations at troubled companies. Sources close to the deal said Bain's presence indicated that the acquirers would seek to restructure Toys R Us rather than liquidate it.
