Zany off to new Start

"Uncommon" is the word John Lee chose to describe the speed between Zany Brainy's filing for Chapter 11 bankruptcy protection in May and agreeing to be sold to The Right Start. The infant/preschooler specialty chain expects its purchase of Zany to be closed in September and, most importantly, in time for the holidays.

"It's a record pace," said the president of Learning Curve and co-chairman of the creditors committee, cautioning that a month later "would've been challenging."

The deal is a perfect fit, Right Start CEO Jerry Welch told PLAYTHINGS, combining "our sweet spot with their sweet spot." Zany targets 5- to 12-year-olds, while Right Start aims lower: at infants and preschoolers.

The California-based chain of 68 retail stores will shell out $11.7 million in cash, $85 million in the assumption of liabilities and 1.1 million shares of The Right Start common stock for Zany's $115 million in cash, inventory and accounts receivable.

Waterton Management, which had previously agreed to fund $115 million to reorganize Zany under bankruptcy, will instead invest $20 million in The Right Start and receive 48 percent interest in the company.

With at least 40 Right Start stores "within a 9-iron of a Zany Brainy," Welch will cross market the brands and put 2,000-sq.-foot Right Start shops inside approximately 130 Zany Brainys, keeping Zany's brand intact.

Zany also plans to return to the Internet for holiday shopping, said President and CEO Tom Vellios, noting the retailer's customers "expect to shop online."

Vellios thanked the vendors for their support. "If the key suppliers believe a deal can be done, it makes sense to take on moderate risk for the potential of future returns," Lee explained. "It's like a patient in the hospital (who) needs blood." International Playthings Vice President of Sales John Jordan added, "we prefer a future with Zany Brainy."