Bloomberg News

Jakks Rises on Speculation of New Oaktree Bid: Los Angeles Mover

February 01, 2012

Jan. 23 (Bloomberg) -- Jakks Pacific Inc., the toymaker that rejected a $20-a-share buyout offer in October, posted its biggest two-day advance since Sept. 15 as investors speculated on a new bid from Oaktree Capital Management LP.

Jakks, based in Malibu, California, rose 5.5 percent to $14.69 at the close in New York. The shares advanced 4 percent on Jan. 20, resulting in the largest two-day jump since Los Angeles-based Oaktree made its offer on Sept. 14.

“There’s a good chance that Oaktree comes back with an offer below $20 but above the current price,” said Gerrick Johnson, a BMO Capital Markets Corp. analyst who has a “market perform” rating on the stock and doesn’t own it. “There are some people believing it might pan out.”

Jakks plummeted 20 percent to $13.85 on Dec. 19 after cutting its 2011 forecast. The company will release fourth- quarter results the week of Feb. 12, according to Anne-Marie Feliciano, a spokeswoman.

Analysts project a fourth-quarter loss of 64 cents a share, the average of five estimates compiled by Bloomberg, on sales of $124 million. The company reported profit of 30 cents on revenue of $198 million a year earlier.

John Christiansen, a spokesman for Oaktree, declined to comment. Jakks hasn’t made any announcement since declaring its opposition to Oaktree’s bid in October, according to Feliciano.

Options traders are more bullish on Jakks shares than at any time in more than six years. Calls priced 10 percent above Jakks shares cost 1.14 times more than puts as of Jan. 20, the highest level since October 2005, according to data compiled by Bloomberg on three-month contracts.

Monsuno Line

Investors may also be optimistic on prospects for a new boys’ toy line, Johnson said.

Jakks is planning to introduce Monsuno, a toy line targeting boys ages 6 to 11 years old where they can “command and battle creatures with destructive potential,” the company said in a December release. Nickelodeon, a children’s TV network owned by Viacom Inc., will air an animated series.

Some investors see Monsuno having the potential to become as popular as Nintendo Co.’s Pokemon, said Johnson, who estimated the toy may arrive this quarter in retail stores.

“It has all the elements to become a big toy franchise,” said Johnson, who has a $15 target price. “If it does become a success, everyone’s model is wrong.”

--With assistance from Joanna Ossinger in New York. Editors: Rob Golum, Anthony Palazzo

To contact the reporter on this story: Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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