Right Start to Acquire Zany Brainy

Aug 16, 2001 9:30 PM  By

Calabasas, CA—Children’s apparel and toys cataloger/retailer The Right Start has agreed to acquire the assets of toys cataloger/retailer Zany Brainy, which had filed for Chapter 11 bankruptcy protection on May 15. The deal is expected to close by Sept. 5, and is subject to final bankruptcy court approval.

According to Right Start CEO Jerry Welch, the new parent company will be aggressive in making Zany Brainy a “true trichannel brand,” emphasizing growth in catalog circulation and its Web business. Previously, Zany focused on driving customers into its 187 stores, though it did mail a catalog in the fourth quarter. While Welch envisions no changes to creative, he does expect plenty of cross-marketing between the brands.

Under the terms of the transaction, Right Start will acquire substantially all of the assets of Zany, including approximately $115 million in cash, inventory, and accounts receivable, for $11.7 million in cash, approximately $85 million in the assumption of liabilities, and the issuance of 1.1 million shares of Right Start common stock.

In conjunction with its acquisition of Zany, the company announced that Los Angeles-based private investment firm Waterton Management will invest $20 million in Right Start. Waterton will receive an approximately 48% fully diluted interest in Right Start before consideration of employee stock options.