Toronto, Canada — Spin Master Corp. reached a definitive agreement to acquire U.S.-based Melissa & Doug, a well-recognized and trusted brand in early childhood play, for $950 million in cash. The acquisition will bolster Spin Master’s position as a leader in the children’s entertainment industry and will bring complementary capabilities in early childhood toys by adding Melissa & Doug’s high-quality offerings of open-ended, creative, and developmental wooden toys.

With a mission to ignite imagination and a sense of wonder in children, Melissa & Doug has developed into a beloved brand of high-quality, sustainable, and learning-enriched play that is sought after and trusted by parents and children alike. The addition of Melissa & Doug will strengthen Spin Master’s offering by adding complementary early childhood products and further diversify its portfolio across new channels and formats.

“What excites us so much about Melissa & Doug is the power of their brand, their deep knowledge in developmental play and their passion for creativity, imagination and sustainability,” said Max Rangel, Spin Master’s Global President and CEO. “As a trusted brand of early childhood toys with an evergreen portfolio, Melissa & Doug will expand Spin Master’s presence in new categories, providing immediate revenue growth, broader reach in all retail channels and market coverage. The addition of Melissa & Doug is highly complementary and connects with our strategic vision to reimagine everyday play, providing a compelling platform for long-term growth through innovation, while also meeting the changing demands of children and parents of the future.”

“Throughout our 35-year history, Melissa & Doug has helped ignite children’s imaginations by fostering open-ended, sustainable play,” said Melissa & Doug President and CEO, Fernando Mercé. We are confident that by working together with Spin Master, we will be able to reach more families, inspire more imaginations and unlock greater growth potential.”

“We have an incredible history of pursuing accretive acquisitions to propel our growth as a company and have become trusted stewards of many renowned and beloved children’s brands,” said Anton Rabie, Spin Master’s Co-founder. “With this acquisition, we are committed to preserving the essence of what Melissa & Doug represents for families and are confident that our investment will enable us to accelerate growth and build upon our legacy as a leader in the children’s entertainment industry now and into the future,” added Ronnen Harary, Spin Master’s Co-founder.

Strategic Benefits – Expands Spin Master’s Offering in Children’s Play and Entertainment

• Trusted brand of high-quality open-ended, creative, and developmental toys
• Highly relevant for modern parents seeking sustainable wooden toys and screen-free play
• Significant growth opportunities through innovation
• Bolsters preschool play presence in the earliest childhood years
• Recurring, evergreen product portfolio with diverse revenue base
• Expands reach in specialty retail and e-commerce channels with potential for growth in mass retail and international expansion.

Financial Benefits – Creates Opportunities for Accelerating Long-Term Profitable Growth

• Attractive brand portfolio of $489 million in revenue1 in 2022.
• $950 million purchase price represents a transaction multiple of 10.5x 2022 Adjusted EBITDA2, pre run-rate cost synergies, and 8.1x 2022 Adjusted EBITDA2, including run rate cost synergies2;4.
• Potential for run-rate cost synergies of approximately $25 million – $30 million, expected to be achieved by 2026.
• In 2024, immediately accretive to earnings per share (“EPS”), pre run-rate cost synergies. Mid-teens accretive to EPS, including run rate cost synergies4.
• Strategic deployment of balance sheet with projected Net Leverage3 below 1.0x Adjusted EBITDA2 at closing, providing ongoing financial flexibility for strategic initiatives and potential future acquisitions.

Spin Master plans to finance the $950 million purchase price with approximately $450 million balance sheet cash and $500 million in debt financing. Additional contingent earnout consideration of up to $150 million is subject to achieving certain financial targets for 2024 and 2025. The earn out payments are scaled linearly to Melissa & Doug’s gross profit outperformance compared to a target for each year. There will be no earnout payments if Melissa & Doug does not reach the target threshold. The earn out payments, if any, will be funded via cash generated from ongoing operations.

The Company remains committed to its quarterly dividend and opportunistic use of its Normal Course Issuer Bid. The transaction has been approved by the Boards of Directors of each of Spin Master and Melissa & Doug and is subject to the receipt of certain regulatory approvals and customary closing conditions. The acquisition is expected to close early in the first quarter of 2024.

Evercore Group LLC, RBC Capital Markets and TD Securities are serving as financial advisors to Spin Master and Torkin Manes LLP and Pillsbury Winthrop Shaw Pittman LLP are serving as its legal counsel. Harris Williams & Co is serving as financial advisor to Melissa & Doug and Fried, Frank, Harris, Shriver & Jacobson LLP are serving as its legal counsel.