The Right Start to buy FAO Schwarz Nov 19, 2001 12:00 PM
, Paul Miller
JobZone
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The sluggish economy isn’t slowing The Right Start in
its quest to become a major player in the children’s specialty
market. The $65 million children’s products cataloger/retailer
agreed on Nov. 19 to buy $150 million toy cataloger/retailer FAO
Schwarz for $55 million. The Right Start had acquired another toy
retailer, Zany Brainy, on Sept. 6.
The acquisition of FAO Schwarz gives The Right Start coverage of
virtually all children’s age brackets, says president Jerry
Welch. The Right Start franchise sells items for newborns, infants, and
toddlers; Zany Brainy specializes in toys for children ages 3-12, and
FAO Schwarz covers the gamut.
While The Right Start plans to continue operating all three
businesses separately, Welch says that the company will aggressively
cross-promote all of the brands in all of the stores. In addition, the
company plans to launch a full-fledged Zany Brainy catalog business
next year. (Zany Brainy periodically mails a catalog designed to drive
traffic to its stores and Website.) "We think there’s a void in
the marketplace," Welch says. "We’ll reevaluate certain matters
with FAO coming on board, but will certainly have a Zany Brain catalog
next year, probably in late spring."
Welch estimates that combined sales of the three brands will be
about $650 million in 2002, with Internet sales of approximately $30
million and catalog sales of another $30 million. As part of the deal,
Dutch retailing company Vendex International NV, from which The
Right Start is buying FAO Schwarz, will become a major shareholder of
The Right Start. The Right Start has agreed to issue preferred stock
convertible into 5 million common shares and an $18 million four-year
note and to assume about $10 million in liabilities. The deal is
expected to close in January.
