CHILD'S PLAY RIGHT START BUYS FAILING ZANY BRAINY.

Byline: Brent Hopkins Staff Writer

CALABASAS - The Right Start Inc. said Thursday that it's acquiring bankrupt toy retailer Zany Brainy Inc., and executives think linking the two businesses should be child's play.

Terms of the deal are complex, negotiated over the past six months among children's specialty chain The Right Start, Los Angeles investment firm Waterton Management LLC and King of Prussia, Pa.-based Zany Brainy.

The Right Start is paying $11.7 million in cash, and assumes $85 million in Zany Brainy liabilities, thus taking control of the chain's 187 stores and $115 million in assets.

Waterton, which acquired Zany Brainy in July, also paid $20 million for 48 percent of The Right Start's stock.

This represents a dramatic jump up in the retail world for The Right Start, which employed 424 people and had yearly sales of $53.6 million earlier this year. In contrast, Zany Brainy employs more than 4,000 people and sold $400.5 million worth of merchandise so far this year.

Both those involved in the deal and industry experts agreed that the synergies between the two companies make this an attractive combination.

``It's like sliding two pieces of a puzzle together,'' said Jerry Welch, The Right Start's CEO, speaking from Pennsylvania as the deal closed. ``We have the same affluent-mom customer, who shops with us for kids ages zero to 4, then Zany gets them from 4 to 12. We'll have a continuous fit with the customer, so they'll be shopping at our stores for the whole beginning of their child's life.''

With this in mind, The Right Start is installing itself in the majority of Zany Brainy's stores. The newly acquired chain's locations boast floor space of 10,000 square feet, which will be consolidated into 8,000.

The cleared space will be used for Right Start counters, which investors hope will lure in more traffic without additional overhead.

``There's no additional costs,'' said Ken Abdalla, a managing member for Waterton. ``We'll gain a huge amount of shoppers from Right Start sales, so the Zany stores that weren't profitable will be making money overnight.''

Though The Right Start expects to close 12 to 15 Zany Brainy stores across the country, Welch said cuts will be minimal, and that affected employees will be transferred to other locations. Since the stores' future had been in question after the bankruptcy filing, industry followers cheered the deal.

``It's an ideal marriage in terms of product mix,'' said Jim Silver, New York-based publisher of the trade magazine Toy Book. ``The toy industry looks at this as a real positive. Both the manufacturers and the retailers are very excited.''

Even Kurt Barnard, the generally dour president of Barnard's Retail Trend Report, saw the deal as a godsend for Zany Brainy, which hit the ropes hard after a failed attempt to add online sales.

``It was really a pity. We were all very sorry to see Zany Brainy go,'' he said. ``I wish them luck and I hope they succeed. Zany Brainy had a wonderful concept, and I hope that The Right Start, which is quite small, can give Zany Brainy the necessary support so it can return to its position as a glittering star on the toy horizon.''

CAPTION(S):

2 photos, box

Photo:

(1 -- color) The Right Start Inc., owner of this Sherman Oaks baby store, has bought Zany Brainy Inc., which sells toys for older kids.

Joe Binoya/Special to the Daily News

(2 -- color) no caption (Dolls)

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