Hasbro Goes Wrebbit Hunting

With Hasbro's (NYSE:HAS) acquisition of edgy puzzle maker Wrebbit, the big keep getting bigger in the toy industry. And with Hasbro already having the basics covered in the world of toys, its decision to buy the Montreal-based toymaker was easy, since Wrebbit is the notable grower in next-generation puzzle crafts.

Wrebbit's no ordinary puzzle maker, you see. Its Puzz-3D products -- like its 1,512-piece three-dimensional rendering of San Francisco, for example -- are works of model art. And for the younger set, its playful Perfalock puzzles are fit for hanging with perforated holes and foam pieces that stay together without the need for whipping out the glue stick.

Between its Milton Bradley and Parker Brothers board games, Tonka vehicles and Playskool diversions, Hasbro has been a market leader in traditional playthings. But this isn't the first time Hasbro has turned to Wrebbit to branch out into new territory. In 1996, Hasbro struck a manufacturing and distributing deal with the puzzle maker to grow Wrebbit's reach with its eclectic yet popular Puzz-3D landmark re-creations. So acquiring Wrebbit was almost just a formality, since the two had been living together harmoniously for so long.

Shares of Hasbro have risen by 51% since they were recommended to Motley Fool Stock Advisor subscribers two years ago. The company remains locked in a battle for toy-realm supremacy with rival Mattel (NYSE:MAT). Sometimes you'll have a company with a hot product -- like LeapFrog (NYSE:LF), with its LeapPad a few years back -- but it's pretty much always been a two-company race.

The sheer size of both companies isn't strictly organic. Mattel scooped up Fisher-Price in 1993 and Tyco Toys in 1997, while Hasbro bought Wizards of the Coast six years ago to get in on the Pokemon trading card craze and the popularity of Magic: The Gathering.

That's why the continuing consolidation in the toy sector isn't a surprise. We're living in a time when Wal-Mart (NYSE:WMT) is the world's largest retailer of toys and specialists like FAO Schwarz and KB are filing for bankruptcy. If you want your toy on the shelves that matter, you need to establish a rapport with the big boys. That's Mattel. That's Hasbro. And for Wrebbit, like one of its many gargantuan puzzles, its inclusion into the Hasbro family fits just fine.

Hasbro was recommended in the May 2003 issue of Stock Advisor and has sincegone on to beat the market. Want more market-beating ideas? Check out the newsletter with a 30-day free trial.

Longtime Fool contributor Rick Munarriz has more than a few Hasbro games around the house. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.