MGA Entertainment CEO Isaac Larian’s bid to buy Toys R Us (TRU) stores appears to be falling short, as the Wall Street Journal this afternoon reported that “Mr. Larian’s offer didn’t meet the qualified bid threshold under the court-approved auction procedures, [a person familiar with the matter] said, and the retailer has taken it off the table.”

Larian had assembled a package offering $675 million for TRU’s U.S. stores and $215 million for the Canadian locations.  The Journal said that TRU’s “lawyers and advisers are still evaluating the other bids they received for the Canadian operations, and it’s unclear if any include keeping U.S. stores open, the person added.” The Larian group was expected to operate about 200 stores in the U.S. and 85 in Canada.

Following the appearance of the article, Larian issued a statement. “I haven’t yet been notified of the bid rejection but if this is true, it is very disappointing,” he said. “It is our hope and expectation that we can continue to participate in the bid process, so we can keep fighting to save TRU, We feel confident that we submitted a fair valuation of the company’s US assets in an effort to save the business and over 130,000 domestic jobs.”

Even before this latest report, some in the industry foresaw issues that had nothing to do with the strength of Larian’s financial package.  “At the end of the day my hope is they have the right people behind him, because he has a toy company to run and has other retailers that he supplies, and he can’t be actively competing with them,” said Isaac Wolman of Make It Real, which had an agreement to supply TRU with licensed Juicy Couture craft kits. “He also has insight into what all the other retailers that potentially would be TRU competitors are doing, and I am not sure how many of those other retailers would buy products from MGA because of this.”

Larian has said he wouldn’t be involved in TRU day-to-day operations were his bid to succeed. But other industry executives say that if he were to be approved, he would have to move quickly.

“We do know he has a toy company to run and the question is who is he going get to come in and get this company operating,” says Jay Foreman of Basic Fun, which is owed about $6 million by TRU. “Toys R Us had a hard time running their stores, and they were a full-time retailer that has had numerous executives in there with retail experience. He has to have the time and the people ready to parachute in there.”

Some have argued that Larian’s bid is a publicity stunt, something Larian dismissed in a Wall Street Journal interview, maintaining that Bank of America Corp. and UBS Group AG are lining up the financing for his bid. Larian launched a $1 billion crowd-funding campaign last month to save at least part of the chain. As of Tuesday,  the effort had raised $62,000 from 2,027 people. That’s on top of the $200 million Larian said would come from himself and other investors.

Contacts:

Basic Fun: Jay Foreman, Pres., 561-997-8901, jay.foreman@basicfun.com

Make It Real Toys, Isaac Wolman. Pres., 410-980-5463, iwolman@makeit realtoys.com

MGA Entertainment, Isaac Larian, CEO,818-894-2525, ilarian@mgae.com