Mattel Inc has agreed to acquire educational and entertainment software house The Learning Co for about $3.8bn in stock. The move comes as part of the toy giant’s efforts to diversify its business and help merge the markets for children’s software and toys as it hopes to build up its brands in an increasingly computer-oriented marketplace. TLC, which is considered the second largest consumer software company after Microsoft Corp, offers Mattel established brands and titles such as Reader Rabbit, Carmen Sandiego, Myst and Riven. The deal has already received approval from the boards of both companies and several large institutional shareholders of TLC have agreed to vote in favor of the deal. It is expected to close in March or April 1999 and will be accounted for as a pooling of interests. In the proposed transaction, each outstanding share of TLC common stock will be exchanged for $33.00 of Mattel stock as long as the average price of Mattel stock during a specified twenty trading- day period prior to the closing is between $27.50 and $33.00. The exchange ratio is fixed at 1.20 at or below $27.50 and 1.0 at or above $33.00. The $33.00 price represents approximately a 16% premium over TLC’s closing price on December 11. The deal, which Mattel says will create the number three market share leader in entertainment software, comes just six months after TLC bought major rival Broderbund Software Inc, for $420m. At the same time its announced the acquisition, Mattel also warned that a substantial decline in re-orders from retailers would adversely affect revenues and earnings for the fourth quarter and the fiscal year.
