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Jakks Pacific stock rises on rumors of takeover bid by Oaktree

The toy maker refused an Oaktree bid last year, but after Jakks slashes its earnings outlook, there is speculation that Oaktree will try again.

January 24, 2012|By Shan Li, Los Angeles Times

After a weak holiday season, shares of Malibu toy maker Jakks Pacific Inc. rose on rumors that it may once again get a takeover bid from Oaktree Capital Management — after rejecting an earlier offer from the Los Angeles investment company.

An industry analyst suggested that, because of the poor holiday results, the new bid may be lower than the last one.

Last October, Oaktree offered to take the toy company private 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 Jakks recently slashed its full-year outlook to earnings of 37 to 40 cents a share and sales of about $660 million. That's a steep drop from an earlier forecast of $1.32 to $1.35 a share in earnings on sales of $770 to $775 million.

The company is expected to release fourth-quarter results the week of Feb. 12.

Gerrick Johnson, a toy industry analyst at BMO Capital Markets, said there was no real news regarding a second takeover bid from Oaktree Capital. But he would not be surprised if an offer was made.

"That's always been my speculation from Day One, 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 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 exciting for children. 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, he said, the board will have a harder time holding that position even if Oaktree makes an offer that is lower than its first.

"I think they will be back with an offer in the $15, $16 range," Johnson said.

Calls to Jakks were not returned. An Oaktree spokeswoman declined to comment.

Shares of Jakks rose 77 cents, or 5.5%, to close at $14.69 on Monday.

shan.li@latimes.com

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