Hasbro, Inc. (HAS) and Mattel, Inc. (MAT) have reportedly had merger talks, which is the best news shareholders in MAT stock have heard in years. Literally.
It also makes you wonder what took them so long. Last year was an epic one for mergers and acquisitions, and a tie-up between the nation’s two largest toymakers is a no-brainer.
Sourcing, distribution, marketing — you name it — the opportunities for cost cuts (aka “synergies”) are vast.
Yes, Hasbro is doing well and HAS stock is on an extended run, but it still has to worry about megacompetitor Lego and the corrosive effects of a stronger dollar. Anything that helps boost margin is always welcome.
But it’s Mattel that really needs this deal to go through. Notwithstanding a spike on the deal rumors this week, MAT stock has been a disaster for the last couple of years, with shares losing about 40% of their value.
Indeed, the selloff in MAT stock got so bad last year that the toymaker had one of the highest dividend yields in the S&P 500, an often dubious honor.
MAT Stock Is No Longer a Joke
Perhaps the best news for anyone holding MAT stock is that it comes to any negotiation from a position of strength … well, maybe not strength, but it looks like the company is on the mend.
Barbie — MAT’s most important toy line — American Girl and Monster High have been bleeding market share for years to the benefit of Lego and Hasbro’s My Little Pony.
MAT suffered another drop in revenue in the most recent quarter, but no one cares. The company beat Wall Street estimates on both the top and bottom lines.
Even more encouraging, MAT had a good holiday selling season. Barbie sales grew in the fourth quarter for the first time in four years.
HAS stock has had no such problems. Driven by the Star Wars and Marvel brands, Hasbro has been a mirror image of Mattel. HAS stock is up 25% over the last 52 weeks and 11% for the year to date. Meanwhile, the broader market has been a money loser over the same time frames.
There is, of course, no guarantee that a deal will go down. The companies held talks last year, according to a story broken by Bloomberg. Heck, maybe the talks stalled and this leak is intended to get them going again.
Either way, MAT stock shot up on the news and its turnaround is gaining traction. With a generous dividend of 5.7%, Mattel shares look frisky for the first time in a long time.
HAS stock is a fine holding as well, but — deal or no deal — MAT probably has more upside because it’s so beaten down.
However it shakes out, MAT stock isn’t playing around anymore.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.
