Mattel To Buy Learning Company
Mattel on Monday warned of a year-end earnings shortfall and said it plans to buy The Learning Company for $3.8 billion.
Mattel (MAT) said it expects 1998 sales to be essentially unchanged from a year ago. It sees earnings for the year of $1.20 a share, a 33 percent decline from the company's previous estimate, Mattel said in a press release. It did not report a forecast for fourth quarter earnings.
A survey of analysts by First Call said Mattel is expected to earn 80 cents per share in the fourth quarter, up 25 percent, and $1.79 per share for 1998, up 11 percent.Separately, the toy giant said it will pay a 16 percent premium over Friday's closing price for shares of The Learning Company (TLC) in a purchase deal worth $3.8 billion, the company said in a press release.
Learning Company fell 3/16 to 28 5/16 ahead of the news on Friday. Mattel rose 5/16 to 30 1/8.
Each outstanding share of The Learning Company stock will be exchanged for $33 of Mattel common stock providing the average price of Mattel stays between $27.50 and $33 within five days of the close of the deal.The exchange ratio is fixed at 1.2 at or below $27.50 and 1 at or above $33.
Besides bein a leading maker of educational software, Learning Company recently bought Broderbund Software, maker of top-selling games such as Where in the World Is Carmen Sandiego? and Myst.
"Although we had a strong Thanksgiving, up 23 percent at our top five U.S. accounts, retailers have determined that they would rather drastically reduce their inventory levels than capture incremental sales," Mattel CEO Jill E. Barad said.
Sales will be reduced by an additional $150 million by a shift in its accounting to match a "just-in-time" shipping pattern - waiting until the first half of the year instead of December to send out new toys for spring.
"These developments were counter to all historical trends, and could not have been foreseen," Barad said. "Our sales were on plan through mid-November, and we had a strong Thanksgiving at retail."
The company said it expects year-end retail inventories for its core brands to be the lowest they've ever been, down almost 30 percent from last year.
"This overall inventory reduction will give us a clean start at all of our accounts in 1999," Barad said.
Written By Steve Gelsi