M&A

Toys “R” Us Buyout Urged by Board

A private consortium gives Toys "R" Us shareholders an offer they (almost)can't refuse.
Marie LeoneMay 24, 2005

Toys “R” Us Inc. shareholders are at the crossroads. Late yesterday, the nation’s second-largest toy retailer notified its shareholders that if they did not approve a buyout of the company by a private investment group, they would be on the hook for up to $30 million worth of reimbursable expenses.

According to proxy documents filed with the Securities and Exchange Commission, stockholders would also have to pay $247.5 million in termination fees and expenses if the buyout agreement was nixed for any one of several reasons, including failure to received stockholder approval; receipt of a better offer; or a protracted deal closing beyond the agreed-upon dates.

The proxy ballot filed with the SEC, was also mailed on Monday to shareholders. The board unanimously approved the deal and declared the buyout “advisable,” as well as “fair to, and in the best interests of, the Company’s stockholders,” according to the filings.

The private consortium, Global Toys Acquisition LLC, is affiliated with Bain Capital Partners, Kohlberg Kravis Roberts & Co, and Vornado Realty Trust. The group made a $6.6 billion buyout offer for Toys “R” Us on March 17.

If the offer is approved at a special June 23 meeting, shareholders would receive $26.75 per share. That’s a 123 percent premium over the $12.02 closing price recorded on Jan. 7, 2004–the day before the Toys “R” Us board announced plans to separate the toy business from the smaller, but more profitable Babies “R” Us unit, the Associated Press reported. Global Toys Acquisition’s offer includes a buyout of both the toy and baby units.

Approval of the deal requires a majority of the shares to vote in favor of the buyout. As of Friday, company officials owned nearly 0.39 percent of the company shares, and all plan to vote their shares in favor of the deal, reported AP.

According to Toys “R” Us officials, stockholders of record as of the close of business on Friday, May 20, are entitled to vote at the special meeting. The company expects to complete the merger by the end of July 2005, subject to the adoption of the buyout terms by stockholders.