October 17, 2011 8:41 pm

Mattel nears deal to buy Hit Entertainment

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Mattel, the world’s largest toy company, which makes Barbie dolls, is close to a £500m deal to buy the children’s media group behind Bob the Builder and Thomas the Tank Engine from Apax Partners, the UK buy-out group.

The US toy maker is in the final stages of negotiations over the purchase of Hit Entertainment, which Apax bought in 2005 for a similar price tag of £489m, two people close to the situation said.

A possible deal, which could still falter, comes after a protracted and complicated auction that started officially in March this year.

Its price tag is far below initial expectations by bankers, who were talking about a company value of as much as £1bn when the planned sale first emerged a year ago.

But the auction, which is being run by Bank of America Merrill Lynch, lost steam recently after media and entertainment companies went out of buyers’ favour amid fears about a renewed economic slump.

Apax’s rival Permira recently stopped a sales process for All3Media, the UK’s largest independent television producer, after offers failed to meet its price expectations amid fears over Europe’s sovereign debt crisis and darkened economic prospects in the US.

The sale of Hit, which will not include the group’s stake in Sprout, a US children’s channel, is set to give Mattel another opportunity for growth in emerging markets.

Thomas the Tank Engine has become the top-selling pre-school toy for boys in China and is by far the leading performer in Hit’s stable, which also includes Angelina Ballerina, Fireman Sam and Pingu.

It is seen as likely that the group would fold Hit’s assets into its Fisher Price toy division, which already holds licensing rights to some Thomas & Friends toys.

The planned sale comes at a critical time for Apax, as Europe’s largest buy-out group is in the middle of the fundraising for its next buy-out fund. It has a target size of €9bn, €2.2bn below its previous fund.

It also comes amid volatile times for owners of children’s entertainment rights recently.

Earlier this year Lord Alli quit as the chairman of Chorion, owner of intellectual property rights to characters such as the Mr Men and Noddy after the company ran into difficulties with an attempted debt renegotiation.

And Entertainment One, the Canada-based part-owner of Peppa Pig and the distribution rights to the vampire film series, Twilight, confirmed it had received approaches.

Lord Alli told the Financial Times earlier this year that the time was ripe for the small companies involved in children’s TV and film rights to consolidate.

Apax, Bank of America Merrill Lynch and Mattel declined to comment.

Additional reporting by Barney Jopson in New York

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