Why this is right time for Mattel to form merger?

Hasbro & Mattel have been engaged in an on and off relationship to create a merger that could possibly be one of the largest in toy industry so far. As per reports by Bloomberg, talks between the two have been initiated during last year. While none of the companies have made any announcement on the probable merger, industry speculates a bigger toy box resulting from this marriage.

Just the right time Over last two decades, Mattel has been a prominent player in toy industry globally; courtesy its top performing brands Barbie and Hot Wheels among others. All this while, Hasbro popularly known for ‘My Little Pony’ has narrowed the gap between the two, as it adds the most awaited Disney franchise – Star Wars: The Force Awakens – to its portfolio. Standing at a worth of $11.3 billion, Mattel posted revenue of $5.7 billion in 2015, while Hasbro, which is valued at $9.5 billion, has reported of $4.4 billion.

Mattel in doldrums Recent past has not been rewarding for Mattel due to stiffening competition and fall out of some of the major licenses. The manufacturers of Barbie lost its shares to Lego as well as Hasbro. While this toy manufacturer was scrambling to update its toys and streamline its bureaucratic corporate structure, it faced yet another jolt as Disney’s ‘Frozen’ and ‘Princesses’ shifted to Hasbro.

These two properties alone garnered a whopping amount of $300 million for Mattel. Also in 2014, Frozen dolls iced out Barbie as top toy for girls, though Barbie has once again freeze the competition reinstating her position. Moreover, this merger (if happens) would come at a time when the toy industry has been performing well. Strong sales of licensed products tied to movies like ‘Star Wars’ and ‘Frozen’ have helped boost sales in recent years. Of the two, Hasbro has performed more strongly thanks to a strong relationship with Disney (which also killed a possible deal with rival studio DreamWorks Animation). Mattel’s business has faced more pressure of late, and CEO Christopher A. Sinclair has steered a turnaround effort that began last year.