Hasbro Inc. and Mattel Inc. combined would result in a toy company with a large but hardly dominant share in a highly fragmented industry. The two companies, which recently engaged in talks about a possible tie-up, would control just over one-third of the U.S. market for traditional toys and games, according to Euromonitor International Ltd.
On a global scale, they would control 22% of overall sales. With a low barrier to entry, the toy industry is populated with hundreds of inventors and small firms seeking to create the next hit. Nevertheless, Hasbro buying Mattel would have a big impact on the sector.
According to toy consultant Richard Gottlieb, inventors would have one less potential buyer of their ideas. Entertainment companies like Walt Disney Co. would no longer be able to play the two biggest companies off each other to extract the best terms on licensing deals. Retailers would face a supplier with much greater sway.
“It's highly destabilizing to an industry to have such powerful and prominent players in the industry having this kind of disruptive situation,” Mr. Gottlieb said. “If you're an inventor, licensor or retailer, this is a concern.”
In some categories, a united Hasbro-Mattel would have much greater heft. For example, in model vehicles, which includes Mattel's Hot Wheels line of toy cars, the two would control 62% the U.S. market, according to Euromonitor data analyzed by Wells Fargo. They would control more than half of the market for dolls and action figures.
Analysts were split as to whether the combination would trigger antitrust objections. BMO analyst Gerrick Johnson said the rise of competitors like Lego A/S, Spin Master Inc. and Just Play LLC “offer potential counterbalances to a Mattel/ Hasbro combo.”
An important issue for regulators would be whether the deal would make it easier for the companies to raise prices, “since they wouldn't discipline each other,” said Seth Bloom, an antitrust expert with Bloom Strategic Counsel PLLC.
|U.S. market share by category|
BY PAUL ZIOBRO