Taking over Barbie? Mattel shares rise after reports of takeover interest.

Mattel Stock - Barbie Takeover? Mattel stock soars on reports of takeover interest.

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Toy manufacturer and entertainment specialist Mattel (NASDAQ:MAT) generated business headlines earlier today over reports of a takeover interest. According to Reutersprivate equity firm L Catterton — backed by a luxury goods brand LVMH (OTCMKTS:LVMUY) — offered to buy the toy company. Mattel’s stock likely rose because previous attempts to turn things around had been unsuccessful.

According to the report, news of the asset management firm’s interest in acquiring the entertainment specialist could lead to competing bids, with the spotlight almost certainly on sector rival Hasbro (NASDAQ:HAS), who are aware of L Catterton’s bid. Management are currently in discussions about whether they should also make a bid.

For context, Hasbro and Mattel have held merger talks. However, the negotiations ultimately proved fruitless. Because the proposed acquisition may be the only way to extract value from the toy brand, Mattel’s stock soared 20% earlier Monday. The move gave the company a market cap of $6.5 billion.

Activist pressure puts pressure on Mattel shares

Foressure from high-level stakeholders has contributed to the overall uncertainty surrounding Mattel stock. In particular, activist investors Barington Capital called on the toymaker to make much-needed changes earlier in February. Proposals included selling off Mattel’s Fisher-Price and American Girl brands and separating the roles of CEO and chairman.

Another pressing concern for Mattel stock is its underlying financials. While the toymaker has seen a boost to its brand thanks to the Barbie movie, MAT suffered a 52-week loss of 23% (before Monday’s pop). Even with the boost included, equity is still down about 13%. Concerns about the business are fueled by Mattel’s profitability potential, particularly in managing unprofitable toy franchises.

It must be said that the company suffered losses in the first quarter of this year which goods smaller than experts expected. Per ReutersTight cost control helped achieve this “profit” victory. However, this good news came against a backdrop of weak sales, which remains a headwind for Mattel stock.

Analysts, on average, predict that revenue will come in at $5.38 billion in fiscal 2024. However, that would be a 1% decline from last year’s $5.44 billion. In the following year, experts think revenue could rise to $5.54 billion. However, that would only represent a 2.9% increase from expected 2024 revenue. And it would only be a move of less than 2% from 2023’s result.

Investors seem to be losing patience, which is why Mattel shares have risen, probably because a takeover is the last attempt to save something of value.

On the date of publication, Josh Enomoto had no (direct or indirect) positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com Publication Guidelines.

The responsible issuer had no positions (either directly or indirectly) in the securities mentioned in this article on the date of publication.

Josh Enomoto, a former senior business analyst for Sony Electronics, has helped broker major contracts with Fortune Global 500 companies. In recent years, he has delivered unique, critical insights to the investment markets, as well as several other sectors including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.