Jakks Pacific Inc. thinks 2012 will be a very good year. The company is so optimistic about its performance that when an investment management firm recently made the Malibu toymaker a buyout offer, Chief Executive Stephen Berman rejected it, saying it grossly undervalued the company.
After months of private negotiations between Jakks and downtown L.A.-based Oaktree Capital Management, Oaktree launched a hostile takeover with an offer of $670 million in cash. The $20-per-share offer was 25 percent higher than Jakks’ closing price Sept. 13, when the bid was announced. Oaktree, with a 4.9 percent stake, is one of Jakks’ largest shareholders.
In its Oct. 5 response, the toymaker rebuffed the price with a hint of vexation, saying the investment firm was exploiting the economic climate to undervalue Jakks.
“Oaktree is attempting to take advantage of current adverse macro-economic conditions in order to buy Jakks below its intrinsic value,” Berman said in a letter to Oaktree. “This seems to be consistent with Oaktree’s investment strategy.”
Analysts believe Oaktree won’t make a follow-up offer that Jakks will accept.
Neither Oaktree nor Jakks would comment for this article.
Oaktree is headed by Howard Marks, No. 35 on the Business Journal’s list of Wealthiest Angelenos with an estimated personal net worth of $1.15 billion.
The company specializes in distressed debt investments, often taking stakes in companies on the verge of bankruptcy. In recent years, it has invested in a variety of troubled companies, including meat manufacturer Pierre Foods in Cincinnati, Las Vegas casino operator MGM Mirage and cable operator Charter Communications Inc. in St. Louis.
Jakks is based at a prominent Malibu site above Pacific Coast Highway, and is best known for making action figures and role-playing games.
Analysts say Jakks’ rejection is the right move because the company’s products for 2012 look better than those for last year and this year.
The company’s traded as high as $24.79 in August 2008, but fell to $10.93 in January 2010. It was trading last week at about $18.
“I can speculate that they believe the products they have for the near term will get the stock price up,” said Edward Woo, a research analyst at Wedbush Securities in downtown Los Angeles.
Some of these new products, which were unveiled at a presentation for analysts in Santa Monica last week, left researchers like Scott Hamann of Cleveland’s KeyBanc Capital Markets glowing. In his analyst note, Hamann wrote that “with a slew of exciting initiatives for the next few years, we believe the risk/reward remains compelling” and that the value of Jakks is “more than the recent $20-per-share unsolicited cash offer.”
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