Mattel's largest shareholder Ariel demands review of strategic options including a sale

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Ariel Investments, the asset management firm that is the largest shareholder of U.S. toy giant Mattel, said on the 5th that it has asked Mattel to explore strategic options including a sale of the company, citing stalled progress in improving performance and profitability. Reuters reviewed Ariel's letter. Ariel, which holds 5.4% of Mattel shares, said the stock remains significantly undervalued, and co-CEO John Rogers said in a letter addressed to Mattel's board of directors that "by our calculations, a strategic buyer would pay a price at a substantial premium to the current share price." Ariel listed options including large-scale asset sales, a merger with another company, and a sale of the entire company, and expressed the view that Mattel's portfolio of brands is attractive not only to rival toy makers but also to entertainment companies and traditional private equity investment firms. Mattel has faced unstable sales and rising input costs over the past two years or so as the sharp earnings boost from the hit movie "Barbie" ran its course, and operating profit has declined for the past six quarters. Mattel said in an email to Reuters that "the board and management are committed to acting in the best interests of all shareholders, and we will consider the views expressed in Ariel Investments' letter along with the opinions of other shareholders." This is the second time this year that an investor has emerged asking Mattel to review strategic options; in May, shareholder Southeastern Asset Management urged the company to consider taking it private as well as a takeover by rival Hasbro or by a major media company that might value Mattel's assets more highly than the stock market does. Last week, Mattel received a takeover approach from Authentic Brands Group, and people familiar with the matter told Reuters it could value the company at about 6 billion dollars or more. However, there is no guarantee Mattel will accept the proposal, and no formal sale process has begun. Mattel shares surged on the report, but are still down about 20% since the start of the year, and according to LSEG data, its forward price-to-earnings ratio for the next 12 months is 9.99 times, below the industry average of 14.03 times. Morningstar analyst Jaime Katz said, "There is probably frustration that the business is somewhat stagnant. Given the current valuation, this may be a good time to rebuild the business as a private company out of investors' sight."

Impact on assets 2

Consumer Discretionary▲ · 2 stocks
Mattel Inc
MAT
▲ PositiveCapitalrelevance

Largest shareholder Ariel urges Mattel to explore strategic options including a sale, arguing a buyer would pay a substantial premium.

Off-coverage companies 3

Ariel InvestmentsPrivate▲ Positive
Capitalrelevance

Ariel, Mattel's largest shareholder, formally demands a strategic review including a possible sale, calling the stock undervalued.

Authentic Brands GroupPrivate▲ Positive
Capitalrelevance

Authentic Brands Group made a takeover approach for Mattel last week, cited as evidence of buyer interest.

Southeastern Asset Management, Inc.Private± Mixed
relevance

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