Mattel investor Ariel pushes for sale as turnaround stalls

Oct 5 — A major Mattel shareholder urged the Barbie maker on Monday to explore a sale, saying progress ​in its performance and profitability had stalled, according to a letter seen by Reuters.

Ariel Investments, which holds a 5.4% stake in Mattel, said the company's shares remain significantly undervalued. "By our estimates, a strategic buyer ‌would pay a significant premium to your current share price," Ariel Co-CEO John Rogers said in the letter to Mattel's board.

The asset manager said Mattel's ⁠options included a "divestiture of significant assets, a merger and/or ​an outright sale of the company." Other toy companies ⁠were likely to find the Mattel portfolio attractive, Ariel said, as were entertainment companies and traditional private equity firms.

Mattel ‌has grappled with choppy sales and ‌higher input costs over the past couple of years as its business stabilized following big gains ⁠from the popularity of the "Barbie" movie. Its operating income has declined ⁠in the last six quarters. Shares of the company were up 0.9% at $16.2 in extended trading.

Ariel's push comes as Mattel also undergoes a leadership transition. Its boss Ynon Kreiz stepped down late last month, taking on the role of co-CEO at Paramount Skydance. Mattel's board member Roger Lynch, who was the head of Vogue and the New Yorker owner Condé Nast, will take over as the toymaker's CEO next month.

"Our board of ‌directors and management team are committed to acting in the best interests of all ​shareholders and will consider the views expressed in Ariel Investments' letter, as well as the views of Mattel's other shareholders," Mattel said in an emailed response to Reuters.

This is the second time this year that an investor has asked Mattel to consider strategic options. In May, Mattel investor Southeastern Asset Management called on the company to explore options, including going private, or being acquired by rival Hasbro or a large media company that would value Mattel's assets better than the public market.

Last week, Mattel was approached by Authentic Brands Group for ​a takeover, potentially valuing the toymaker at around $6 billion or more, a source familiar with the matter told Reuters. There is no guarantee ‌that Mattel will ‌be open to Authentic ⁠Brands' approach, and there is no formal sale process ongoing for the company, the source had said.

Mattel's shares soared after the news. Despite that rally, the stock has lost a fifth of its value this year. The toymaker trades at a forward 12-month price-to-earnings ratio of 9.99, compared with an industry average of 14.03, according to LSEG data.

"I think there's ‌just some frustration that maybe the ​business has stalled a little bit and it would be a ‌good time, given where the valuation ⁠is, to perhaps turn ​this business around away from investor eyes," Morningstar analyst Jaime Katz said.

(Reporting by Angela Christy and Juveria Tabassum in Bengaluru; Editing ​by Shilpi Majumdar)

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