(Updates with Jakks’ response in seventh paragraph.)
Sept. 14 (Bloomberg) -- Oaktree Capital Management LP, the investment company that oversees $80 billion, said funds it manages plan to buy Jakks Pacific Inc. for about $670 million after the toymaker refused to enter “meaningful” talks.
The cash offer of $20 a share is about 25 percent more than Jakks’s closing price yesterday and its 30-day average, Los Angeles-based Oaktree said in a statement today. The firm said its funds and accounts now own 4.9 percent of the Malibu, California-based maker of action figures and electronic toys.
The deal would be the biggest in the toy industry in more than five years, according to data compiled by Bloomberg. Oaktree’s offer is 6.97 times Jakks’ earnings before interest, taxes, depreciation and amortization last year, compared with the median 8.38 for 16 similar deals since 2006, the data show. Jakks sells toys under the Pokemon and Star Wars brands.
“We are strong believers in the potential for long-term value creation at Jakks,” Oaktree said. Taking Jakks private “would enable the company to execute a long-term value creation strategy free from the pressures of managing short-term objectives and seasonality,” the investment company said.
Jakks surged $4.25, or 27 percent, to $20.25 at 9:30 a.m. New York time in Nasdaq Stock Market composite trading. The shares had fallen 12 percent this year before today.
The toymaker’s management has since March “repeatedly rebuffed” the proposal to take the company private, Oaktree said. “Since the time of our initial discussions in March, macro-economic conditions have deteriorated significantly, and the company’s prospects have not improved.”
Jakks Chief Executive Officer Stephen Berman said in a letter released today that the company would “carefully consider” the offer. Rothschild Inc. and Skadden, Arps, Slate, Meagher & Flom LLP are acting as Jakks’ advisers, Berman said.
Kirkland & Ellis LLP is advising Oaktree, according to the investment firm’s statement.
The deal will be the biggest purchase in the toy industry since Carlyle Group paid $1.1 billion for Oriental Trading Co. in July 2006, according to data compiled by Bloomberg.
Jakks’ products include princess dolls licensed from Walt Disney Co. and Hello Kitty products through an agreement with Japan’s Sanrio Co. The company in July gained the global master toy license for the “Men in Black 3” movie being produced by Sony Corp.’s Columbia Pictures.
It also produces electronic games that plug into televisions such as “Big Buck Hunter” and “Pac-Man.”
Second-quarter net income rose 43 percent to $4.24 million on sales that grew 7 percent to $132 million, Jakks reported in July. The company affirmed 2011 forecast earnings per share of $1.32 to $1.35.
--With assistance from Frank Longid in Hong Kong and Kevin Orland in Chicago. Editors: James Callan, Kevin Orland
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