VTech took Mark Twain's advice and has decided to consume the toy industry's largest toy company with a frog in its name – LeapFrog. Late last week, VTech announced its plan to purchase the struggling company for $72 million ($1 per share). LeapFrog's 2015 annual revenues were $339 million with a net income loss of $218 million. That's a big drop from the company's 2013 finish of $553 million in revenues and net income of $84 million (Hoovers).
Even with LeapFrog's problems, it seems like VTech is getting the company for a very good price. The LeapFrog brand is loved and trusted, particularly in the U.S. VTech, which earlier this year suffered negative fallout from a hack that effected 6.4 million children, could use some of that love and trust.
The problem with getting a really good deal is that it sparks interest from other potential acquirers. In fact, some speculate that there may be a competitive bid from another company before LeapFrog shareholders vote. In fact, one analyst, Gerrick Johnson of BMO Capital Markets, values the stock at $2 per share.
On a final note: I like and respect the people at LeapFrog. It's important to remember that even though the talk is about profits, losses and brand value, there are people whose lives will be impacted. In fact, there are people who made that brand value possible and gave the company its soul. Let's all remember to think about them as this transaction unfolds.