Jakks Pacific makes action figures and other toys. (Jennifer S. Altman / Los…)
After a bad holiday season, shares of Jakks Pacific Inc. rose on rumors that the toy maker will receive another takeover bid from Oaktree Capital Management after rejecting an earlier offer from the Los Angeles investment company.
Oaktree had previously offered to take the Malibu toy company private last October in a $670-million hostile bid that offered shareholders $20 a share in cash. At the time, analysts speculated that the offer was too low.
But after a poor fourth quarter, Jakks recently slashed its full-year outlook to earnings of 37 to 40 cents a share on annual sales of about $660 million. That's a steep drop from an earlier forecast of earnings of $1.32 to $1.35 a share on sales of $770 million to $775 million.
Gerrick Johnson, a toy analyst at BMO Capital Markets, said there is no real news regarding a second takeover bid from Oaktree. But he would not be surprised if one came to the table.
"That's always been my speculation from Day 1, even after they pre-announced a terrible fourth quarter and the stock dropped to $13," Johnson said. "It was always my opinion that Oaktree would come back with another offer."
One of the five largest U.S. toy companies, Jakks designs and markets dolls, action figures and other items for children. It is also a licensee of major brands including Disney, Nickelodeon, Cabbage Patch Kids and Hello Kitty.
But analysts say the toy maker struggled to connect with shoppers during the crucial holiday season and did not offer anything especially compelling for kids. As a result, retailers have marked down their Jakks merchandise and have not reordered extensively from the toy company to replenish their shelves.
All that is potentially good news for Oaktree.
Jakks "rejected the $20 offer because the board said they can generate more stockholder value on their own," Johnson said. After the "disastrous" holiday season, the board will have a harder time holding that position even if Oaktree makes an offer lower than its first bid, he said.
"I think they will be back with an offer in the $15, $16 range," Johnson said.
Calls to Jakks were not returned. An Oaktree Capital spokeswoman declined to comment.
Shares of Jakks rose 77 cents, or 5.53%, to close at $14.69 on Monday.
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