G.I. Joe landed on Boardwalk yesterday.
Hasbro Inc., which makes the popular soldier action figure, said it would pay nearly $500 million to acquire gamemaker Tonka Corp., a move that will enlarge what is already the nation's biggest toy manufacturer.
The jointly announced merger of the companies will bring together a wide range of classic playthings in one toy chest -- all to be controlled by Rhode Island-based Hasbro, which also makes Lincoln Logs, Cabbage Patch Kids, Transformers, My Little Pony, Scrabble and Mr. Potato Head.
Tonka, based in Minnesota, has the Monopoly board game in its lineup, along with Play-Doh, Pound Puppies plush toys and Real Ghostbusters action figures. Tonka, whose board of directors has already approved the plan, will become a wholly owned subsidiary of Hasbro when the deal is complete.
"We are extremely pleased to welcome Tonka into the Hasbro family of companies," said Alan Hassenfeld, chairman and chief executive at Hasbro. "The combined entity will be better able to compete in the increasingly more competitive international marketplace."
Analysts agreed that the consolidation will help both companies at a difficult time for the toy manufacturing and retailing industry. Consumers nervous about the shaky economy and the crisis in the Middle East bought fewer toys this past Christmas.
"This has been an all-around lousy year for toys, and 1991 is not going to be a whiz-bang year either," said Walter Kirchberger, retail analyst with PaineWebber Inc. in Detroit. "So it's helpful to have more operational efficiencies and financial and managerial strength at a time of difficulty."
Tonka was especially struggling because of heavy debt from its 1987 acquisition of Kenner Parker Toys Inc. and its inability to introduce new best-selling products in a quick-changing industry. Tonka lost $25.4 million in the first three quarters of 1990 on sales of $541.3 million, a 14 percent decline from the year before.
Hasbro did better, but was also seeing declines. The company, which also makes Milton Bradley board games and Playskool toys for young children, had sales of $1.03 billion in the first nine months of 1990 and earned $61.3 million for the period, a 10 percent decline from a year earlier.
While exact figures for the deal were unavailable, Hasbro said it will make a $7-per-share cash tender offer for all of Tonka's 15.3 million outstanding shares and assume all of Tonka's debts. Hasbro officials said the total price of the friendly acquisition would range from $470 million to $520 million, which would be paid for by cash on hand and existing credit.
Tonka stock has traded as high as $14 a share in 1990 and at nearly $23 a share in 1989. The stock closed yesterday at $6.50 a share, up $2. Hasbro's stock closed at $18.75 a share, down 37 1/2 cents.
Still, industry observers said the deal was a good one for both companies and creates an industry giant. Hasbro was already the biggest U.S. toymaker, followed by California-based Mattel Inc., which makes the Barbie doll and has annual sales of about $1 billion.
"They will have better marketing clout, financial resources. ... This transaction is definitely going to add some competitive juices to the trade," said David Leibowitz, toy analyst with American Securities Corp. in New York.