The El Segundo, Calif.-based manufacturer of Barbie and HotWheels toys has succumbed to lackluster sales over the last several years in its toddler segment. Its once dominant Fisher-Price brand, which targets the same audience as Thomas the Tank, only made up $1.83 billion of its $5.86 billion in revenue last year.
The company’s buy of Thomas & Friends, which has been popular among toddlers and children around the world for nearly 67 years, making up about 80% of Hit’s profit, will be key to Mattel’s efforts in revamping those sales.
“With more than half of the Thomas & Friends revenue generated from non-toy products, this transaction will marry Mattel’s global marketing, distribution and brand management capabilities with HIT Entertainment’s global programming and licensing expertise to accelerate growth of the combined portfolio,” Mattel CEO Robert Eckert said in a statement.
Hit Entertainment is a U.K.-based children’s entertainment company that owns the rights to Thomas & Friends, including its tracks, engines and television shows. The company, which is owned by private-equity company Apax Partners, also has a wide portfolio of other popular children’s toys, though the deal does not include its interest in the cable network station Sprout.
While Mattel already markets many Thomas & Friends plastic toys under a license from Hit that extends through 2014, the U.S. toymaker said the purchase allows it to continue expanding and growing the product line into “the foreseeable future.”
Mattel was among other toy companies vying for a bid for Hit, however The Wall Street Journal reported last week that Mattel and Hit had entered exclusive talks and that a deal was imminent.
The transaction is expected to be financed using both cash and debt and is slated to close in the first quarter of 2012, pending certain closing and regulatory approvals. Mattel said the deal isn’t expected to have a material impact on its 2012 earnings.