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Mattel Surges After Dismal Results Lead to Takeover Speculation

  • Investors should see company from sale viewpoint, analyst says
  • Weak quarterly report hammered Mattel’s stock last week

Mattel Inc. gained the most in more than a year after its bleak quarterly results renewed speculation that the company may be better off as a takeover target.

Gerrick L. Johnson, an analyst at BMO Capital Markets, said on Monday that investors should “start looking at Mattel from a sale of the company perspective.”

The report followed a surprisingly sharp sales decline at Mattel last quarter. The toy company, which makes Barbie and Fisher-Price, suspended its dividend and escalated a cost-cutting push to cope with the slump. Mattel also blamed the bankruptcy of Toys “R” Us Inc. for hurting sales, especially in North America.

Mattel’s shares tumbled in the wake of the report on Thursday, and its market valuation is now hovering around $5 billion. But its assets could be worth much more if there’s a sale or breakup, Johnson said in a note. He has the equivalent of a buy rating on the shares, which he expects to climb to $20.

“Its brands and manufacturing footprint could be worth more than $10 billion in their current state,” he said. “Thus, the company could have value to a financial, industry or entertainment conglomerate buyer.”

Mattel rose as much as 9.9 percent to $15.39 on Monday, erasing Friday’s plunge. The stock had lost almost half its value through the end of last week.

— With assistance by Matthew Townsend