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Investors purchase Toys R Us for $6.6 Billion Date: 3/17/2005 |
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By Lorrie Grant, USA TODAY A group of investors anted up $6.6 billion for the entire Toys R Us company (TOY), ending what started as an auction for just its toy stores, the firms announced Thursday. The winning group includes private investment and real estate firms - Bain Capital Partners, Vornado Realty Trust and affiliates of Kohlberg Kravis Roberts (KKR). Toys R Us CEO John Eyler will continue to steer the retailer. The deal calls for acquisition of all outstanding shares of Wayne, N.J.-based Toys R Us for $26.75 each. The stock rose $1.23 on Thursday, or 5%, to close at $26. "This is a pretty good deal for the stockholders. It's difficult to believe that the stock would be anywhere near this price without the auction," says Sean McGowan, an analyst at Harris Nesbitt Gerard. Eyler sees the price as a vote of confidence in the business. "What you conclude is that the buyers see great opportunity, and that Toys R Us will be around for years and years to come," he says. The deal, set to close in July, ends a strategic review Toys R Us launched in August. That included separating its struggling No. 2 toy business from its fast-growing Babies R Us stores, and later putting it on the block. Aggressive toy discounting by Target and Wal-Mart, now the No. 1 toy seller, had taken a toll, as had some missteps by Toys R Us. Final bids for the global toy operation (681 U.S. stores, 601 international) were $3 billion to $3.5 billion. But the auction changed swiftly more than a week ago when one of the final four bidding groups made a surprise offer of about $5.5 billion for everything, including the 217-store Babies R Us chain. That prompted two other toy bidders, KKR and the Bain-Vornado team, to join to bid for the whole operation. "The winning bidders were competitors until about 10 days ago," Eyler says. Since they started out with separate plans for Toys R Us, "How they will mesh their two strategies will be the first thing they resolve," he says. "The second thing will be working with the management team to blend in the current strategies." KKR had no comment. Bain and Vornado did not return calls. The announcement did not mention store closings, but the presence of real estate investors shows the deal also is about property. "You have to assume they'll grow Babies R Us and look at Toys R Us on a store-by-store basis and see whether it makes more sense to convert that store in a real estate deal or to use it as part of a growth strategy. There are some stores that will be worth more to somebody else," says Kenneth Bernhardt, chairman of the marketing department at Georgia State University. |
| Source: USA Today |
