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Mattel, Hasbro playing with merger?
According to a newspaper, some analysts expect union of No. 1 and No. 2 toymakers; others skeptical.
October 20, 2005: 9:37 AM EDT

NEW YORK (CNN/Money) - A merger of Mattel and Hasbro, the No. 1 and No. 2 toymakers, could become a real possibility as the toy industry struggles to boost sales and counter the significant threat from discounters like Wal-Mart and Target, according to a published report Thursday.

The New York Post, citing a note from an industry analyst earlier this week, said a combination of Mattel (Research) and Hasbro (Research) would benefit from substantial cost savings and provide an important counterweight to pricing competition from discount retailers.

However, other industry observers scoffed at the idea, saying that such a union would raise too many "antitrust" issues.

"These companies are under pressure to generate sustained revenue and earnings growth, and that could lead to more consolidation in the toy industry," A.G. Edwards analyst Tim Coder wrote in a note this week. The paper said that in the note Coder also called such a possible merger between the two companies as "most logical."

The Post said Mattel spokeswoman Marie Bongiovanni told the paper that it was the company's policy not to comment on mergers or acquisitions.

However, the paper said Bongiovanni alluded to Mattel CEO Robert Eckert's comments during a Q&A session with analysts during a conference call with analysts this week in which he said an acquisition would only happen "if it was the right company at the right time at the right price."

"Everybody wishes Mattel would buy Hasbro, but that probably won't happen,"Sean McGowan, analyst with Harris Nesbitt, was quoted in the paper as saying.

Mattel expressed interest in Hasbro before when the two companies discussed a merger in 1996, but the deal fell through over antitrust issues, the paper said.

Combined, the two companies have about 29 percent of the $21 billion toy market, according to marker research firm NPD Group.

Jim Silver, an independent toy industry analyst and editor of trade publication Toy Wishes magazine, told CNN/Money that such a merger " does not make any sense."

"If they do merge, Mattel and Hasbro would have a monopoly in the boardgame market as well as in the infant and toddler market with the combination of Playskool and Fisher Price," Silver said. "The companies would have to give up one or two of those divisions."

Among the companies he does see as attractive acquisition targets for Mattel and Hasbro are Lego, Binney & Smith, best known for its Crayola crayons and Leapfrog Enterprises (Research), maker of interactive learning systems.

"Hasbro isn't in the learning category, so Lego is a perfect candidate for them," Silver said. "Both companies aren't strong in educational' family entertainment, so Leapfrog also is attractive."

Hasbro spokesman Wayne Charness declined to comment on the Post story. "There are always rumors and speculation on the street. Our policy is never to comment on them," Charness told CNN/Money.

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Not a fun quarter for toy companies. Click here to read more.

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