Mega Brands Inc MBLKF

NBF report

[FrankoL]

I though I would share with you guys the report from National Bank Financial, about the sale of Megabrand. They recommend to tender. Please share if you have one from your institution, they can provide some good information.

Mattel to acquire MB at $17.75 in cash; 32% premium

• Mattel, Inc. (MAT-Nasdaq, Not Rated) and MEGA Brands announced a definitive agreement for MAT’s acquisition of MB at $17.75 per share in cash, a 32% premium to the 30-day VWAP. The transaction has been unanimously approved by MB’s Board of Directors and shareholders (Fairfax & Bertrand family) who collectively hold 39% of shares outstanding. Closing is expected in Q2/14 (60 day process).

We believe it is a fair deal for MB shareholders

• The agreement represents total EV of $460 million or 9.8x MB’s preliminary estimated 2013 EBITDA of $47 million (implying a significantly weaker Q4 due out Tuesday, March 4th). Toy M&A activity has been scarce, but we point to Mattel paying a similar multiple of 9.5x for HIT Entertainment in 2012. The multiple also looks fair on a forward-looking basis as it implies 8.4x revised NBF EBITDA, which is above MB’s historical average multiple of 6.5x-7.0x.

Partnership evolved into friendly transaction

• The relationship between MAT and MB started with licensing (Barbie and Hot Wheels) over a year ago and evolved into this friendly acquisition which was struck without a formal sales process. While the possibility of a superior offer exists, particularly in a toy industry dominated by giants (e.g., LEGO, Hasbro), we feel it is unlikely. The deal should create a stronger #2 by leveraging Mattel’s international distribution. As per MB, “there is no better partner for the future”.