Homepage

News > Fortune 500
    SAVE   |   EMAIL   |   PRINT   |   RSS  
Group to buy Toys 'R' Us for $6.6B
Consortium of equals, led by buyout firm KKR Group, wins bid for all of the toy retailer.
March 17, 2005: 2:33 PM EST
By Parija Bhatnagar, CNN/Money staff writer
 QUICK VOTE  
Do you shop at Toys "R" Us?
  Yes
  No, I go to discounters and smaller stores
  I don't buy toys

   View results

NEW YORK (CNN/Money) - Toys "R" Us announced Thursday that it has agreed to sell the entire company to a group of investors led by KKR Group, Bain Capital and Vornado Realty Trust for $6.6 billion, plus the assumption of debt.

The sale brings to an end seven months of speculation about the toy seller's future in the midst of increased industry competition from discounters such as Wal-Mart (Research) and Target (Research).

Shares of Toys "R" Us (Research), the No. 2 toy retailer, rose just over 5 percent on New York Stock Exchange.

Under the terms of the agreement, the investor group will acquire all the outstanding shares of the Wayne, N.J.-based Toys "R" Us for $26.75 a share. That represents an 8 percent premium to the company's closing price Wednesday of $24.77 a share.

According to the announced deal, each of the investors -- New York-based buyout specialist firm Kohlberg Kravis Roberts & Co, Boston-based private equity firm Bain Capital and New York-based real estate investment trust Vornado -- will own equal stakes in the company upon completion of the transaction.

Together, the private equity group beat out rival Cerberus Capital, which also was reported to be actively engaged in the bidding for Toys "R" Us.

The completion of the deal, which is expected to occur in July, is contingent upon both regulatory approval and the approval by Toys "R" Us shareholders.

"During the course of our strategic review, we redefined our business model and sharpened our competitive position," CEO John Eyler said in a statement. "We believe that our new financial partners will help us build on this momentum and we look forward to a successful future as a leading toy and baby products retailer."

1,500 stores -- now

Toys "R" Us reported sales of $11.5 billion last year. The company, which emerged as a public company in 1978, owns 1,500 stores worldwide, including 681 Toys "R" Us stores, 218 Babies "R" Us stores in the United States, 601 international toy stores and its online unit Toysrus.com

The sale may portend a sizeable number of store closing to come. [Click here for more on possible store closings]

The retailer first announced last August that it was looking to sell part of its business -- primarily its global toy operations -- and to spin off its better-performing Babies "R" Us unit.

Industry observers said the move was mostly expected as independent toy retailers have struggled to recover from the constant, brutal price war launched by Wal-Mart and Target during the all-important holiday shopping season.

Last year, Toys "R" Us shuttered 102 out of 146 Kids "R" Us stores and all 36 of its Imaginarium stores.

While sales at the company's domestic stores continue to decline, its Babies "R" Us stores, which sell baby furniture, toys and clothes, certainly has been the stronger segment for the company.

In fact, Babies "R" Us accounts for three-quarters of the company's operating income, despite logging just 15 percent of the company's total sales in the previous fiscal year.

Industry observers said the complete sale of the company, rather than a dismantling of the company in piecemeal fashion, was widely speculated, made sense.

"There would have been gigantic costs associated with the unbundling process given that the different units share warehouse and distribution centers," said Howard Davidowitz, retail consultant.

Click here for a look at the hot toys for 2005.

Click here for more news on Fortune 500 companies.

Click here for more on corporate deal-making.  Top of page

graphic


YOUR E-MAIL ALERTS
Toys R Us Incorporated
Bain Capital
KKR Group
Vornado Realty Trust
Manage alerts | What is this?