TRU sale nears 'close'

The acquisition of Toys “R” Us by a trio of investors is expected to close this month, following shareholder approval of the deal in late June.

The vote was substantial for the chain's acquisition by an investment group comprised of Bain Capital Partners, Kohlberg Kravis Roberts and Vornado Realty Trust. Prior to the meeting, some 125 million-plus proxies had been cast in favor of the buyout said John Eyler, TRU CEO and chairman, who has guided the chain through one of the most tumultuous times in recent toy retail history. “Almost 98 percent of all votes cast were positive” in favor of the acquisition, he told those attending the special shareholders meeting.

Literally in the eleventh hour, TRU overcame the final hurdle leading to the buyout. The day before the meeting on June 23, Delaware's Court of Chancery, in an 88-page decision, determined that there would be no injunctive relief for a group of shareholders looking to stay the vote, leaving the door open for the possibility of higher bids for the company.

The decision, however, stated that shareholders “were well-served” by the Toys “R” Us board of directors. The decision also noted that the board had made “real world choices” consistent with the reality of today's marketplace.

Eyler noted that since he came onboard, shareholder equity in the company had increased by some $4 billion.

Eyler himself will leave the company he has led since 2000, when Toys “R” Us had $3.3 billion in value for its shareholders. At the time of the sale, the company had $6.6 billion in equity, he said.

COO Christopher Kay will also leave once the acquisition is consummated.

After almost a year of planning, speculation and publicity that was spun both positively and negatively, the entire process that would take TRU private occurred in about five minutes.

Following the vote, Eyler opened the meeting for questions—many of which concerned the future of the toy chain specifically. But there were no representatives from the new ownership to answer them. And Eyler noted several times that he was not at liberty to answer questions about TRU's future beyond 2005.

For the time being, the change of ownership will likely be transparent.

When asked about the impact of the sale on the toy industry overall, Eyler said he believed there would be no negative impact.

“In my personal opinion,” he said, “there will be no material impact on the toy industry. There are many places to sell toys,” he added.

Eyler was pensive and reflective in developing the answer to one shareholder's question: What have you learned from your experience at TRU.

After the ripple of quiet chuckling from the audience subsided, the CEO acknowledged that he thought it would have been easier to unlock the value of the company through the U.S. market.

But when a professional is responsible for a business and to its shareholders, “you have to be flexible in the ways you skin the cat,” he quipped. “We learned we could offset the difficult U.S. environment through Babies “R” Us and through foreign sales.”