Mattel rejected a merger with MGA Entertainment. Here's why the toy giant is likely being trolled.
- Mattel has rejected an unsolicited merger offer from MGA Entertainment, according to the LA Times.
- MGA CEO Isaac Larian may have been trolling the company given his demands, past comments about Mattel, and the two toymakers' legal battles over the past 15 years.
- Larian's offer demanded his appointment to CEO and chairman, and the resignation of Mattel's board "without any further compensation."
- "It could be a way to draw attention to criticizing Mattel but through the lens of making them a business offer…" said Ory Label, who wrote a book on the pair's courtroom wars.
- Watch Mattel trade live.
Mattel has rejected an unsolicited merger offer from MGA Entertainment, according to the LA Times. Given MGA CEO Isaac Lauren's demands, past comments about Mattel, and the two toymakers' legal battles over the past 15 years, he may have been trolling the company.
Mattel - which owns Barbie, Fisher-Price, Hot Wheels, and American Girl - sued MGA in 2004 for copyright theft after a Mattel employee sold it the idea for Bratz, according to the New Yorker. The employee said he came up with the concept during a months-long break from work, the New Yorker said. A court awarded $100 million to Mattel in 2008, only for another court to reverse that decision in 2009 and award MGA more than $300 million, according to Reuters.
MGA - which makes Bratz and Lol Surprise dolls - subsequently accused Mattel of spying on rivals and stealing confidential information, according to ABC. It also filed a lawsuit seeking more than $1 billion in damages, claiming Mattel was trying to bankrupt it with legal bills and monopolize the US doll market by intimidating suppliers and vendors, bribing retailers, and reorganizing doll displays in stores, according to the Fashion Law.
Given the bad blood between the two companies, MGA founder and CEO Isaac Larian may have been trolling Mattel by proposing a reverse merger. He flagged several of Mattel's weaknesses in his letter to CEO Yvon Kreiz, which he shared via LinkedIn. They included falling revenues, operating losses, large debts, declining shareholders' equity, and legal exposure from its Fisher-Price Rock 'n Play Sleep being linked to the deaths of more than 30 babies.
Last year, Mattel's net sales fell 8% to $4.5 billion, and it reported an operating loss of $237 million, more than $2.2 billion in net debt, and a 47% decline in stockholders' equity to $670 million, according to its full-year earnings report.
Larian also highlighted Mattel's falling stock price. Its shares have slumped 37% in the past year, slashing its market cap to $3.7 billion. News of Larian's offer sent its shares up 10% on Wednesday.
The conditions laid out in Larian's proposal suggest he wants to embarrass his longtime rival. He demanded his appointment to chairman and CEO of the combined group, and that all Mattel's board members resign "without any further compensation," according to the correspondence shared via LinkedIn.
The deal was "creatively constructed" to include Mattel settling its $1 billion lawsuit with MGA, with the payout becoming equity in the new company, said Stephanie Wissink, an analyst at Jefferies. Larian also hinted he was exploring a hostile takeover in a recent interview with Bloomberg.
MGA and Mattel didn't immediately respond to requests for comment from Business Insider.
"Larian is someone who has always enjoyed playing out market competition in the media," said Orly Lobel, author of "You Don't Own Me: How Mattel v. MGA Entertainment Exposed Barbie's Dark Side," in an email to Business Insider.
"Publicly stating that he is making a bid to merge with Mattel allows him an opportunity to position himself as a major player and at the same time he is saying that Mattel has been stagnating and isn't doing as much innovation as it could and has a series of problems," Label added.
"It could be a way to draw attention to criticizing Mattel but through the lens of making them a business offer."
Larian said Mattel executives "rejected this generous offer in order to, selfishly, protect yourselves instead of shareholders' interest," the correspondence showed. In a LinkedIn post in 2017, he described himself as "bitter and negative about Mattel," called the company's legal counsel an "arrogant idiot," and accused the company of engaging in "criminal activities."
Larian may have sent his proposal in good faith, but his demands, negative comments, and years spent battling Mattel in court suggest he's more interested in showing up his nemesis.
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