Fisher-Price could be on track for big earnings with Mattel's purchase of the company behind Thomas the Tank Engine.
Mattel has agreed to buy HIT Entertainment, which owns Thomas & Friends and Bob the Builder, for $680 million in cash from a consortium led by private equity firm Apax Partners. It's the toy maker's biggest acquisition in a decade.
HIT will become part of the Fisher-Price division. The East Aurora-based company has been developing and manufacturing toys for HIT through a licensing agreement since 2009, but after the acquisition, Fisher-Price will develop both the toy and consumer product lines of the business. That will include blankets, clothing and other nontoy products bearing the likeness of HIT's global portfolio of preschool products.
In addition to Thomas & Friends and Bob the Builder, HIT owns such popular brands as Barney, Fireman Sam and Angelina Ballerina.
"More than half the Thomas & Friends-brand revenue comes from outside the toy aisle," said Brenda Andolina, a spokeswoman for Fisher-Price.
The company will continue working with vendors HIT has in place to license consumer product lines.
"Mattel has been looking to make a strategic acquisition for a really long time. Our paths crossed, and it's rare a property of this caliber would come up for sale," Andolina said.
Licensed brands, such as Thomas & Friends and Sesame Street, are managed out of Fisher-Price's New York City office; the development and promotion of the brands are supported by the company's East Aurora headquarters.
"It's only going to strengthen the company and our position in the worldwide marketplace," Andolina said.
Mattel said the deal will help combine its global marketing and distribution capabilities with HIT Entertainment's global programming and licensing expertise, said Robert A. Eckert, Mattel CEO.
"It's really a world-class brand," Andolina said. "Particularly, Thomas & Friends is on the same level as [Mattel-owned] Barbie, Hot Wheels and American Girl."
Global sales of Thomas & Friends toys are more than $150 million.
The acquisition will allow the company to take over the license for wood-based toys as well when the license expires at the end of 2012. Sales of wood-based toys have been about the same as the die-cast and plastic business.
Thomas & Friends is a popular British children's television series that has spawned a variety of tie-ins and toys. Mattel sells a Follow Me Thomas version of Thomas the Tank Engine that follows a light for $39.99 and a Kevin the Crane vehicle for $7.99.
The deal is expected to close in 2012. It is the biggest since CEO Robert Eckert took Mattel's helm in 2000.
The company, based in El Segundo, Calif., has previously focused on "smaller, tuck-in type acquisitions," said Jefferies analyst Per E. Ostlund. The size of this deal indicates the management team believes this deal will boost results significantly, he added.
"We believe it wouldn't have made this particular transaction unless it was very confident that it was value-accretive," he said in a note to investors.
Mattel shares rose 46 cents, or 1.7 percent, to $28.15 in morning trading.
The Associated Press contributed to this report.