NEW YORK — Hasbro Inc., the nation’s second-largest toy maker, entered into a definitive agreement Monday to acquire No. 3 Galoob Toys and, most importantly, its franchise for “Star Wars” small-scale figures and vehicles, for $220 million in cash.
In addition to its “Star Wars” product, Galoob’s roster also includes a recently launched series of “Titanic” collector dolls and a celebrity doll line, the first offering of which is the highly successful Spice Girls.
But there’s no doubt Galoob is driven by George Lucas’ perennially popular “Star Wars” series. According to company-filed documents, Galoob’s revenues fell 24% last quarter, primarily because the year-earlier quarter benefited from demand for company products “created by the re-release of the Star Wars Trilogy.”
The falloff was most noticeable among boys’ toys, sales of which cratered 62% in the quarter, lacking the “Star Wars” boost.
In addition, Galoob previously acknowledged an exclusive worldwide licensing agreement with Lucas Licensing Ltd. to make “small-scale figures, vehicles, playsets and accessories for the next three Star Wars movies.”
In the 21 years since the first “Star Wars” film was released, the franchise has been a marketing phenomenon, selling toys and other items worth more than $1 billion. With the new trilogy nearing release, the value of the toy line is certain to spike up again.
Under the agreement announced Monday, Galoob is required to pay Lucasfilm Ltd. minimum advance payments of $148.1 million — to be applied against future royalties — the first of which is due with the “Star Wars” prequel’s release next May 21.
Last October, Lucasfilm concurrently struck a multiyear pact with Hasbro to make action figures, which would extend over the release period of the three upcoming “Star Wars” prequels. As part of its deal, Hasbro also granted warrants to Lucasfilm, equaling 5% of the company.
Hasbro’s acquisition of Galoob now puts the majority of “Star Wars”-related toys under one roof. (Lucasfilm has a separate deal with the Lego Group for “construction toys”).
Galoob president and CEO Mark D. Goldman said Monday his company would benefit “enormously” from “Hasbro’s global reach and resources.”
Specifics call for shareholders of San Francisco-based Galoob to receive $12 a share in cash, a price that sent the company’s stock up 43% Monday to call at $11.44 a share. The stock had traded as high as $17.88 in the past year.
Pawtucket, R.I.,-based Hasbro, which among toy makers is second only to Mattel, encompasses such lines as Playskool, Kenner, Tonka, Milton Bradley, Parker Bros. and Tiger.
Hasbro said it expects the acquisition to drag earnings down a bit this year, but to stop being dilutive in 1999. Its stock dropped 3.2% on the news Monday to close at $30 a share.
Lucasfilm execs declined comment, but the company did issue a statement: “We congratulate Hasbro and Galoob on their agreement and are delighted that Hasbro will be able to include these additional toy rights in their overall “Star Wars” licensing program.”
(Chris Petrikin in Los Angeles contributed to this report.)