Mattel has agreed to buy the company behind Thomas the Tank Engine and Bob the Builder for $680 million in cash, the toy maker's biggest acquisition in a decade.
The owner of Barbie, Hot Wheels and Fisher Price toys announced Monday that it is buying Hit Entertainment from a consortium led by private equity firm Apax Partners.
Mattel Inc. already markets many Thomas & Friends die-cast and plastic toys under a license that extends until 2014. Global sales of those toys are more than $150 million.
Mattel said the deal will help combine its own global marketing and distribution capabilities with Hit Entertainment's global programing and licensing expertise, said Robert A. Eckert, said Mattel CEO.
The acquisition will allow it to take over the license for wood-based toys as well, when the license expires at the end of 2012. Sales of wood-based toys have been about the same as the die-cast and plastic business.
Thomas & Friends is a popular British children's television series that has spawned a variety of tie-ins and toys. Mattel currently sells a Follow Me Thomas version of Thomas the Tank Engine that follows a light for $39.99 and a Kevin the Crane vehicle for $7.99.
The deal is expected to close in 2012.
It is the biggest since CEO Robert Eckert took Mattel's helm in 2000.
The company, based in El Segundo, Calif., has previously focused on "smaller, tuck-in type acquisitions," said Jefferies analyst Per E. Ostlund. The size of this deal indicates the management team strongly believes this deal will boost results significantly, he added.
"We believe it wouldn't have made this particular transaction unless it was very confident that it was value-accretive," he said in a note to investors.
Mattel shares rose 57 cents Monday, or 2.1 percent, to close at $28.26.