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Toy Maker Jakks Plans to Buy Pentech

May 23, 2000|INDRANEEL SUR | TIMES STAFF WRITER

Malibu toy company Jakks Pacific Inc. will announce today that it has agreed to acquire Pentech International Inc., a New Jersey maker of pens, pencils and markers, for $17.6 million in cash.

Executives said the purchase would help reduce Jakks' dependence on the fortunes of its World Wrestling Federation action figures, the source of most of the company's sales in recent years.

Jakks would offer $1.40 in cash for each Pentech share, about 54% above Monday's closing price of 91 cents a share. Jakks would also assume more than $19 million in Pentech debt, the company said.

Stephen Berman, Jakks president and chief operating officer, said the acquisition would make the company the fourth-largest U.S. toy maker, excluding video games, in terms of sales. Jakks had net sales of $183.7 million in 1999, up from $85.3 million the year before.

Edison, N.J.-based Pentech reported a net loss of $330,000 on sales of $60.9 million last year, and had net losses in four out of the last five years. But Berman said Jakks managers plan to bring Pentech into the black through licensing agreements for stationery and pen sets tied to children's television and movie characters.

Pentech products would be combined and marketed with those of Flying Colors Toys, a Jakks subsidiary that makes molded plastic activity sets and lunch boxes tied to Mattel's Barbie doll and Nickelodeon's "Blue's Clues" cartoon characters, Berman said.

No layoffs are planned at this time for Pentech's nearly 150 workers, executives said.

Jakks had net income of nearly $22 million in 1999, up from $6.4 million the year before.

Analysts were expecting Jakks, with its strong balance sheet, to make an acquisition this year.

The Pentech purchase, which requires shareholder and regulatory approvals, is expected to close in the third quarter of this year.

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