Video: Toy story news services
updated 3/17/2005 3:19:41 PM ET 2005-03-17T20:19:41

Toys R Us Inc., the nation’s second-largest toy seller, said Thursday it has agreed to be acquired by an investment group that includes two private equity firms and a real estate developer in a transaction valued at $6.6 billion, plus the assumption of debt.

The announcement came seven months after the Wayne-based company announced it would seek to separate its struggling toy business from the smaller, but more lucrative, Babies R Us division.

Instead, the company will be swallowed whole by Bain Capital LLC, Kohlberg Kravis Roberts & Co., and Vornado Realty Trust, who will be equal partners.

Under the terms of the agreement, the investment group will acquire all of the outstanding shares of Toys R Us, Inc. for $26.75 per share, representing a transaction value of $6.6 billion plus the assumption of debt

Toys R Us had been a public company since 1978. Completion of the deal requires regulatory review and approval by the shareholders, and is expected to occur by July, the company said.

Toys R Us, second only to Wal-Mart Stores Inc. in toy sales, announced in August it would separate its toy business from the Babies R Us segment, but did not say how.

The toy business has been losing market share for years to Wal-Mart and other discounters such as Target.

Although Toys R Us has 681 toy stores in the United States, and 601 overseas, the 218 Babies have been an increasing factor in profitability.

Babies R Us, which sells baby furniture, clothes and accessories, accounted for three-quarters of the company’s operating income, despite logging just 15 percent of the company’s $11.6 billion in sales for the fiscal year that ended Jan. 31, 2004.

In that fiscal year, sales at Babies R Us stores open at least a year rose 2.8 percent, while sales at domestic Toys R Us stores open at least a year fell 3.6 percent.

Results for fiscal 2005 were to be released Thursday, but the company on Tuesday said the figures would be indefinitely delayed to allow the company to compute changes in how it accounts for leases. The delay was not related to the planned restructuring, the company said.

The Associated Press contributed to this report.


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