Thomas the Tank Engine owner grabbed by Mattel - Evening Standard

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The British owner of Thomas the Tank Engine, Bob the Builder and
Angelina Ballerina was today snapped up by US toys giant Mattel in a
$680 million (£426 million) deal.
That is less than the £489 million which private-equity firm Apax paid
for HIT Entertainment in 2005 and considerably less than the £1
billion price tag some bankers were suggesting when it was first put
up for sale again a year ago.
Mattel has been negotiating the deal with Apax since March as the
values of other entertainment brand rights companies have tumbled.
HIT has outstanding debts of $560 million and recently renegotiated
terms with its banks leading to it paying a higher interest rate.
Mattel already markets much of the Thomas range under licence from
HIT, which account for annual sales of more than $150 million.
The takeover will allow it to bring all the Thomas products, notably
the wooden range, in house alongside its toy brands like Barbie and
Hot Wheels.
HIT's chairman is the former BBC director general Greg Dyke.
Thomas has seen off many newcomers in the pre-school children's market
and remains the number one licensed brand in that market in the world.
"HIT Entertainment owns some of the most loved and trusted pre-school
brands in the world and, under Mattel's leadership, I look forward to
seeing them grow to even greater heights," said Jeffrey Dunn, chief
executive of HIT. The purchase price represents 9.5 times HIT's
earnings before tax, interest and depreciation.
Rival group Chorion, which owns rights to Noddy and the Mr Men, is
being broken up on behalf of its banks.
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Reply to
Bruce
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Probably a refinancing deal. A lot of these are done in order to minimise taxes. Works OK when your market is stable or growing, not so good when sales are dropping. I suspect Thomas sales will drop for a while because the target demographic (small children of middle class families in industrialised countries) is shrinking.
Wolf K
Reply to
Wolf K
In message , at 16:32:59 on Mon, 24 Oct 2011, Wolf K remarked:
Ah, got it. They have TV (and other) rights worth apparently a little over a billion dollars, but have only paid for about half of that. The other half financed by this loan. Presumably Mattel can finance this debt on better terms than HIT was able to.
Reply to
Roland Perry
In message , at 09:54:45 on Tue, 25 Oct 2011, Lester Caine remarked:
If they paid half a million for *just* the rights, then APAX is seriously out of pocket - having paid $890m for the company in 2005, and getting back just $680m[1] of which $560m would be needed to pay back the loan.
I think there's a danger of double-counting here and Mattel must have inherited the debt, because the FT says not just that they bought the company, but APAX (only) made a "slight loss".
[1] Plus any other smaller items sold off in the mean time.
Reply to
Roland Perry
It has very little to do with financing terms. From Mattel's POV, TTT is a good buy, as it increases their share of the existing toy market. They're very good at acquiring competitors, and usually promote the brand vigorously after acquisition. They'll pay the going rate of interest if the business case indicates a fast enough return on investment. If not, then they won't buy, no matter how low the interest rate might be.
From HIT's POV, it produces a tax loss (since they're selling for less than they paid) which offsets some (perhaps all) of the profits they've garnered 2005-2011. IOW, they'll walk away with a tidy sum in profits on which they will pay no tax.
Why does this work? Because of a little thing called "deferred tax", a nice little deal in which you are allowed to not pay tax in the year in which you accrued them, and then offset accumulated tax payable with losses incurred at a later date. The details differ between jurisdictions, but that's the principle.
HTH Wolf K.
Reply to
Wolf K
In message , at 09:28:55 on Tue, 25 Oct 2011, Wolf K remarked:
That was just an aside.
Do you mean APAX's POV? And if you make more of a loss selling it than the total of trading profits to date, how does that actually help? You'd have been better of never having it.
Reply to
Roland Perry
Slip of the keyboard.
Then you pay no tax on the profits at all. And the selling loss is treated as happening all at once, so it can reduce your current taxable income to below zero, in which case you can carry that loss forward against future profits. If you are a corporation, and not a real person, that is.
A deferred tax isn't paid until then rules say you have to pay it. As I said, the details (formulas for calculating taxes owed, deferred, payable etc) vary by jurisdiction, but the principle is that a corporation can offset past taxes against present and future losses. They just defer the current taxes, and recalculate the tax owed and payable when income in later years decreases or a loss occurs. Unlike real people, who must pay their income tax when the income is earned, period. It would be nice if you and I could defer taxes, and when we've lost our jobs, can reduce tax payable by offsetting the deferred, unpaid taxes against current (zero) income.
Another incentive to sell even at a loss is the compensation of senior executives, who can "earn" bonuses even when their companies are going bankrupt. They "earn" these bonuses by preventing even greater losses, you see. But that's a whole 'nother can of worms.
If it all this sounds more than a little weird to you, well, welcome to the real world, in which wealth is being transferred from them that hasn't to them that has at a rate not seen since since the 18th century.
HTH, Wolf K.
Reply to
Wolf K
I don't actually care.
It was family history that I was fascinated by the Rev.d's stories being read on 'listen with mother'.
When they were written they were about current railway practice. Now kids are not going to come across bankers or brake vans going past their bedroom window. By the time Mr Awdry died his charming little stories had been shortened, branded, and were part of the toy trade.
Now most kids are given the toys long before, if ever, reading even the bowlderised books, let alone the real ones. It has already become a devalued trade-trash brand indistinguishable from things like 'hello kitty', and nothing to do with the original books & artwork, and nothing to do with real railways.
The sale to Mattel can't do any more damage.
Reply to
bobharvey
One of those thing from my childhood that eventually got lost was a 7" single record with some stories on it. I almost wore one part of it out when I was a little older, one track which must have featured either Henry or Gordon travelling at high speed blowing a whistle had very little speech. This made a good a sound track for my tri-ang set way before all those digital decoders,on board speakers and things.
G.Harman
Reply to
damduck-egg
Johnny Morris recorded books 1 - 8 on 16 Delyse EPs, subsequently released as 4 Decca LPs. All the remaining W Awdry books[1] were recorded by Willy Rushton. The Johnny Morris LPs come up regularly on eBay, where you can expect to pay about a fiver for a good one. I have only once seen a Willie Rushton LP there - I don't think they can have been anything like as successful.
The Johnny Morris recordings are excellent, and the Willie Rushton ones are pretty good too. Both are far better than the whining scouser who has massacred the books since.
Ian
[1] I have two Johnny Morris EP recordings from later in the series and the sleeves give numbers for six discs (ie three more books). I suspect that not all six of these were issued, and those that were are unusual now.
Reply to
The Real Doctor
The Johnny Morris recordings? He was excellent and got the music of the trains' speech right which Ringo and the Britt woman's producers completely failed to do - how anyone could get that so wrong stuns me to this day.
Sam
Reply to
Sam Wilson

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