NEW YORK -- Tyco Toys Inc. and Universal Matchbox Group Ltd. said Wednesday they had reached an agreement for Tyco to acquire Matchbox for $135 million.
The acquisition is part of Tyco's strategy to further expand its businesses outside of the United States, said R. Michael Kennedy, senior vice president at Tyco.
'Matchbox has significant business in countries we want to be in, such as Western Europe, the South Pacific and in Southeast Asia,' he said. 'They have a distribution network in place and through it we can get our products out there.'
Kennedy said he expects the deal to be completed in the next two to three months.
Under terms of the pact, Matchbox stockholders would receive $10.75 a share, consisting of $8 in cash and .0656 shares of Tyco common stock. The deal is subject to certain adjustments based on the market price of Tyco common stock.
Tyco stock rose 12.5 cents to $43.875 a share on the New York Stock Exchange Wednesday, while Universal Matchbook stock jumped $3.625 to $10 a share.
Tyco, the fourth-largest U.S. toymaker known for its electric racing and radio-controlled cars, will get into the miniature diecast metal car business with the acquisition of Matchbox, said Andres Beja, an analyst at Advest Group in Hartford, Conn.
Matchbox cars and trucks are collected by both adults and children.
Tyco, based in Mount Laurel, N.J., is the maker of View Master and also mechanical dolls, such as California Rollar Baby and My Pretty Ballerina.
Universal Matchbox is headquartered in Hong Kong.
John McRae, an analyst at Smith Barney Harris Upham, said Tyco was paying too much for Matchbox. With Matchbox's sales at about $167 million in 1991, McRae said $135 million was a hefty price tag.
He also said the quality of Matchbox cars has been on the decline. 'It's not the collectible it used to be.'
Kennedy said Matchbox has gotten away from its core business -- diecast cars and vehicles -- and that it has 'robbed them of profit.' But he said Tyco plans to redirect the emphasis back to its traditional strength.
Tyco had annual sales of $462 million in 1991.
David C.W. Yeh, the chairman of Matchbox, owns more than 60 percent of the shares or share equivalents in the company. He has agreed in principle to the acquisition.
McRae said Tyco's decision to acquire Matchbox came out of a need to further boost its boys' toy segment with Matchbox cars and trucks. 'Tyco has cleaned up its balance sheet and they have some money to spend,' he said.
While Tyco is well-known for its boys' toys, McRae said girls' toys make up two-thirds of its business.
The merger agreement is subject to the approval of a majority of Matchbox shareholders with voting rights and the boards of both companies.