Thomas to be integrated into top-five Mattel brands

October 24, 2011 by Wendy Goldman Getzler

Mattel, the world’s largest toy company, has acquired Thomas & Friends brand-owner HIT Entertainment for US$680 million in cash from a consortium led by Apax Partners and has big plans for the little blue train engine.

The 60-year-old Thomas brand stands as the centerpiece of the deal and will be integrated into the company’s top-five core brands, which also include Fisher-Price, Barbie, Hot Wheels and American Girl.

“Thomas is a franchise just like Barbie and Monster High is a franchise, and now we’re in a position to own it in perpetuity,” said Mattel chairman and CEO Bob Eckert in a conference call this morning.

Aside from the Thomas & Friends property, which currently ranks as the number-one licensed preschool brand in the world, the deal will place big names like Barney, Bob the Builder, Fireman Sam and Angelina Ballerina under the Mattel umbrella.

With more than US$180 million in annual revenues, HIT represents one of the largest independent owners of preschool IP.  And with more than half of the Thomas & Friends revenue generated from non-toy products, the acquisition will marry Mattel’s global marketing, distribution and brand management capabilities with HIT’s global programming and licensing initiatives.

From a content standpoint, the brand reaches roughly one billion households worldwide through programming and DVDs, and Mattel has outlined plans to make Thomas even more relevant in TV, digital and live events businesses that will naturally extend into toys. The company also wants to grow Thomas’ reach in Latin America and Asia, where the brand has historically been underdeveloped.

Mattel already markets many Thomas & Friends toy products under a five-year license from HIT, which extends through 2014. Mattel’s global sales of Thomas & Friends die-cast and plastic toys total more than US$150 million annually, and, with full ownership, Mattel will now integrate toys with its wood-based business. The current Mattel-HIT wood license expires at the end of 2012, at which time Mattel expects to add that line of business to its portfolio. Historically, the sales of wood-based toys have been around half the size of the plastic and die-cast business.

The acquisition, which is expected to close in early 2012, does not include HIT’s 25% interest in US-based preschool cable network station Sprout. Mattel says the ownership of a TV network does not fall within its strategy.

There’s no word yet on what will happen to the interest in Sprout, nor have any announcements been made publicly about the fate of HIT’s New York and London offices or its senior executive team.

Rumors surrounding a HIT sale emerged this time last year, at which point the company was valued at more than US$1 billion.

Tags: Apax Partners, Bob Eckert, HIT Entertainment, Mattel, Thomas & Friends