SOUTHLAND FIRM TO BUY RENOWNED TOY CHAIN RIGHT START INC. TO GET FAO SCHWARZ MAGIC.Byline: Gregory J. Wilcox Staff Writer CALABASAS - In a deal that extends its reach from infants to teen-agers, Right Start Inc.'s chief executive said Monday that the educational toy An educational toy is a toy designed to teach people, typically children, about a certain subject or help them learn a skill as they play. Examples include:
n See Food and Agriculture Organization. Schwarz chain for $55 million. The acquisition will unite Calabasas-based Right Start's Zany Brainy brain·y adj. brain·i·er, brain·i·est Informal Intelligent; smart. brain  i·ly adv. stores with high-profile FAO Schwarz's flagship Fifth Avenue toy store A toy store, or toy shop, is a retail business specializing in the services of selling toys. No longer held to the limitations of the brick and mortar outlet, the toy store has successfully created a presence within the e-commerce industry. and 22 more throughout the country. Right Start plans to close other FAO Schwarz stores but did not identify which ones. The transaction includes the rights to the FAO Schwarz name and its Internet and catalog operations. Right Start agreed to assume some debt and to issue preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. convertible into 5 million common shares, as well as an $18 million four-year note, to the Dutch company that owns FAO Schwarz. Right Start's stock went up 80 cents Monday to close at $6.05. ``This is like fitting the pieces of a puzzle together. It's an American icon,'' Jerry Welch, Right Start chief executive officer, said about FAO Schwarz. ``The awareness of FAO Schwarz is almost universal, and it's a magical experience when you go into their stores.'' In Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, , FAO Schwarz operates a store at the Glendale Galleria The Glendale Galleria is a large 3 story regional shopping mall located in Glendale, Los Angeles County, California. It is the second largest mall in Los Angeles County. It is located in Downtown Glendale. and is opening one at the expanded Farmers Market in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. . The company also has stores at South Coast Plaza South Coast Plaza is an upscale shopping mall in Costa Mesa, California, USA, in Orange County, and one of the most notable shopping centers in the United States. In 2004, Women's Wear Daily in Orange County and in San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. , San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden and Sacramento. It's a 140-year-old company known for its wide variety of premium merchandise and emphasis on snazzy snaz·zy adj. snaz·zi·er, snaz·zi·est Slang Fashionable or flashy. [Origin unknown.] snaz displays. The deal gives FAO Schwarz's parent, Dutch retailing giant Vendex International, a major stake in Right Start, founded in 1985. Combining the two companies seems like a good fit, especially since the toy industry has been struggling with the slumping economy and the consumer malaise after the Sept. 11 terrorist attacks. FAO Schwarz's investment bankers approached Welch about the deal six weeks ago. This is the second big purchase by Right Start in four months. In August the company bought Zany Brainy for $115 million, the first attempt to extend its market penetration by moving up the age ladder. Bryant Riley, president of B. Riley & Co., a Los Angeles-based research firm, said the deal will let Right Start leverage buying power Buying Power The money an investor has available to buy securities. In a margin account, the buying power is the total cash held in the brokerage account plus maximum margin available. Also referred to as "Excess Equity. with its suppliers. But it's too early to tell whether Right Start's buying binge will work out. ``These purchases have the chance to be home runs (since) you are buying assets at fire-sale prices because the economy is weak and you have the Internet bumble of a year ago,'' Riley said. Right Start targets children from infancy to the age of 3 for its products, and kids ages 3 to 12 are Zany Brainy's market. FAO Schwarz covers some of that territory, plus teen-agers and adults. Right Start, Zany Brainy and FAO Schwarz all target households with average annual income of more than $60,000. ``We're all speciality retailers and sell the best of the products. We emphasize service, and all have Internet and catalog operations,'' Welch said. That synergy will translate into cost savings in accounting and distribution operations. Right Start outsources its distribution, and neither Zany Brainy nor FAO Schwarz has a distribution facility west of the Mississippi. Right Start has about 2,200 employees and FAO Schwarz about 1,500. About 800 of those jobs will be eliminated, Welch said. The FAO Schwarz name will survive, and the company will maintain its Manhattan headquarters and continue to be run by its current chief executive, Bud Johnson. Customers should not expect any changes. ``From a customer perspective, the stores will absolutely stay unique and present the same image that they always have. We are certainly open for cross-marketing, using behind-the-scenes resources,'' Johnson said. FAO Schwarz is working on a timetable for store closings. ``Certainly, prior to Sept. 11, the toy industry had not been strong for a year and a half. Since Sept. 11 it has gotten more difficult in the short term, but we are starting to see some rebounding,'' Johnson said. For example, FAO Schwarz's catalog and Internet sales are now running about 5 percent ahead of last year's levels, and customer traffic on the weekend has picked up, too, he said. Likewise, Right Start's Welch thinks the business is starting to turn a bit. ``Sales are good right now. We've determined that Santa is going to come this year. Most people are going to spend money on their kids. We certainly don't think this is going to be a disaster. Toy sales will actually be quite good this year,'' he said. Right Start Inc. is a national specialty retailer of developmental, educational and care products, toys, games, books and multimedia products. CAPTION(S): box Box: TOY STORY Calabasas-based The Right Start is acquiring the toy chain FAO Schwarz. Source: Hoovers Online Daily News |
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