Giant toymaker Mattel (NASDAQ:MAT) has been having a rough half-decade, despite its ownership of some classic brands. Younger upstart MGA Entertainment, by contrast, has been faring well. And even though the two have been at loggerheads in court over intellectual property, MGA has for quite some time expressed interest in acquiring Mattel.
In this segment of the Market Foolery podcast, host Chris Hill and MFAM Funds' Bill Barker reflect on the latest chapter in that story, which may well be the last, given that Mattel has spurned MGA's latest offer, and MGA has decided that it didn't really want to own Mattel anyway. They talk about where the two companies go from here. And they also talk about Toy Story 4, the latest installment in a movie series that features more than a few great Mattel brands.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on June 19, 2019.
Chris Hill: Shares of Mattel are down this morning on the news that MGA Entertainment, which is a private company -- MGA has toys that are really aimed at much younger kids; their best-known brand is probably the Bratz dolls -- MGA Entertainment has tried in the past to acquire Mattel. This is their second attempt, and they've basically given up. The news is, MGA is basically moving on from this second attempt to acquire Mattel. As they have been wont to do on many occasions over the last few years, shares of Mattel are down.
Bill Barker: Yeah. MGA pointed out, least in an article where there's some quotes published by thestreet.com, that Mattel's got $4 billion in debt and there's a major legal liability related to the Fisher-Price Rock 'n Play Sleeper, and that there's just too much mess to clean up there. Which sounds kind of like a jilted pursuer. "Ah, didn't want her anyway! She's got all these problems!" After being rejected twice. I think that now, MGA is noting all the reasons why they wouldn't have wanted Mattel anyway.
Hill: That's entirely possible. We don't know MGA's financials because they're a private company. I just look at Mattel over the last few years, and that is a stock chart that is just steadily down and to the right. I mean, it is a quarter of the size it was five years ago. I get that this didn't work out. But I don't know how much longer Mattel can keep going like this.
Barker: Yeah. I guess I'm in the camp of those that assume that sooner or later, Hasbro will acquire Mattel, just because it's got some great brands. After all the mistakes that it's made, still, it's got a number of enduring brands. If you can just put it in the hands of some good management, which Hasbro certainly has, it might revive this company. But in the meantime, I think Mattel is continuing to give the Heisman to suitors and, as you say, down and to the right is the pattern.
Hill: I think, if we know for certain that in the next two years, Company X buys Mattel, Hasbro is probably the safe bet. It actually wouldn't surprise me if it was a company like Walmart. When you look at the way Walmart has incorporated the acquisitions it's made, in terms of different brands, as you say, Mattel has some brand equity there. In the hands of the right management, and certainly with Walmart, they've got as good a distribution network as you're going to see, I would put them on the shortlist as well.
Barker: To give some numbers around Mattel and where it's gone as a stock, it's about the same price it was in 1992. Again, for those out there having trouble with math, 27 years ago. Just to help you out.
Hill: I appreciate it! I always appreciate help with math.
Barker: They've got problems! They've got a future, given all these brands -- it was much higher in 1999 when Toy Story came out, the original one, which featured a lot of great work by a lot of Mattel's characters.
Hill: [laughs] Fantastic. Yes. Toy Story 4 opening this weekend. I can't say I'm going to be going the opening weekend, also because my kids are older. But it wouldn't surprise me if they were like, "Yeah, let's go see this!" Maybe not opening weekend. Right now, Toy Story 4, for any Disney shareholders who got slightly nervous at the train wreck of an opening that Dark Phoenix had, fear not, because here comes Toy Story 4, which is projected to do at least somewhere in the neighborhood of $200 million at the box office opening weekend. They're certainly doing a lot of promotional work around it. But as you were saying earlier this morning, the voice talent that they've got, this is now a franchise that... Pixar strikes me as one of those companies that, if they went to anyone and just said, "Hey, would you come do three lines in a studio?" Anyone's going to say yes to this. The voice talent that they've got for this one, it's not just the usual suspects with Tom Hanks and company. Jordan Peele, Keegan-Michael Key, Christina Hendricks. You were telling me, I was unaware of the fact, talk about the Wayback Machine -- they've got Carl Reiner and Carol Burnett and Betty White.
Barker: And Mel Brooks. They are locking up the Mount Rushmore of great comedians, which would include for many Mel Brooks and Carl Reiner and Carol Burnett. Betty White has had a hell of a second, third, and fourth act for her career in the last 10 years, although great for decades before that as well. I think that expands the audience quite a bit, even if they are all just showing up for a couple of lines. Boy, the talk shows will eat up any appearance, to promote this, that Betty White or Mel Brooks might show up for.
Hill: I'm asking you this like I'm expecting you to have the answer. I don't expect you to have the answer --
Barker: This is a first! I didn't know this was ever going to happen for me on this show.
Hill: I'll ask anyway. Do you know what they did in terms of replacing Don Rickles? Mr. Warmth.
Barker: I do! I do know what they've done. They're using archive audio.
Hill: Oh, fantastic! I mean, Don Rickles, that's a really tough voice to replace.
Barker: It's very tough to replace. I take this from the Wikipedia page, which has got this great chart of all the different people that have done the voices for everybody over all the years. There are all these additional, non-theater-released parts of Toy Story, shorts and pieces that were maybe a holiday special or something, so you can see who did the voices for those, because it wasn't the big stars. It's remarkable, the depth here. It'll be nice to get a last little bit from Don Rickles.
Hill: You know what? Now I'm seriously considering going the opening weekend, in part because I'm looking forward to Key and Peele as the plushy toys. And then, Keanu Reeves, to go back to Canada, hopefully to make up in some small way from yesterday's mistake with the Canada story being two years old, Keanu Reeves voices a character named Duke Kaboom, who is Canada's greatest stuntman. That alone has me thinking about plunking down whatever a movie costs these days. I think it's $58 for a single ticket.
Barker: Yeah, but you can expense that because it's research for the show.
Hill: A little thing we like to call research.
Barker: Yeah, you've got a budget for that.
Hill: I knew I had you in here for a reason!