Malibu toymaker Jakks Pacific Inc. had hoped that its latest move to buy back its stock might help fend off a hostile takeover by Oaktree Capital Management LP. But now it looks like the move may even facilitate the acquisition.

Jakks, which makes the popular Smurfs and Hello Kitty toy lines, announced in May that it would buy back 4 million shares at $20 a share. That price was a nearly 25 percent premium over its trading price and equivalent to the downtown L.A. private-equity firm’s per-share offer to acquire the company. The tender offer was intended to appease shareholders and boost Jakks’ share price.

But then shareholders tendered more than 22.7 million shares – nearly all shares outstanding – by the time the offer ended last week. And when the toymaker said it would stick to its original agreement to purchase only 4 million shares, or about 15.8 percent of those tendered, the stock tumbled $2.03, or 11 percent, on June 28 to close at $16.05.

The end result: a lower share price and fewer shares outstanding.

“I think this potentially increases the odds that Oaktree will make another run at Jakks. Now there are slightly fewer shares that Oaktree has to buy and their ownership increases,” said Edward Woo, research analyst at Ascendiant Capital Markets LLC in Irvine.

Oaktree had been in talks with Jakks over a potential acquisition until mid-June when the two sides couldn’t agree on a confidentiality agreement that would have opened up the company’s books. Oaktree had argued $20 a share, or about $670 million for the entire company, was a fair price, while Jakks management said that significantly undervalued the company, though it did not announce a price it considered fair.

Woo noted that since shareholders dumped the stock for less than $20 after Jakks refused to increase the size of its self-tender offer, the toymaker will have a hard time making the case it is worth much more than that. And at least one institutional shareholder, New York’s Clinton Group Inc., has sent a letter to Jakks’ board urging it to consider Oaktree’s offer.

Still, Jakks has another line of defense. In March, the company adopted a shareholders’ right plan, or a poison pill, that is triggered should any shareholder acquire more than 10 percent of outstanding shares. As of March 30, Oaktree had accumulated about 1.34 million shares, or 5.13 percent of outstanding shares.

“(Oaktree) does have a poison pill and certain hurdles to overcome,” said Woo. “Oaktree has been in this process since March of last year and they can be patient and have shown they can be patient.”

Jakks and Oaktree declined to comment.

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