Mega Bloks to acquire Rose Art

By Staff -- Playthings, 6/15/2005 7:19:00 AM

MONTREAL and LIVINGSTON, N.J.—Mega Bloks today said it has entered into a definitive agreement to acquire Rose Art for $350 million. The transaction combines two companies focused on construction toys, arts and crafts, and other creative-activity products, and is expected to close during third quarter 2005, according to wire reports.

Mega Bloks stock was up $1.73 (9.38 percent) to $20.29 in early trading today. Rose Art is privately held.

Rose Art, a family firm founded in 1923 and owned by brothers Lawrence and Jeffrey Rosen, had sales of $285 million US in the year ended March 31 and recorded an operating profit of $43 million. The company is a "strong No. 2 to Crayola" in arts and crafts, and its other products include Magnetix magnetic building sets, school supplies and assorted games and puzzles.

"This acquisition reflects the company’s commitment to expanding our market opportunity and growing our consumer base," said Marc Bertrand, Montreal-based Mega Bloks’ president and CEO. "With this transaction, the company solidifies its position as one of the largest players in the U.S. arts and crafts market. The combination of Mega Bloks and Rose Art is an excellent strategic and operational fit."

The deal has Mega Bloks acquiring all of the issued and outstanding shares of Rose Art Industries Inc., Warren Industries Inc., and their respective subsidiaries (collectively "Rose Art") for $350 million, including approximately $35 million in debt.

The purchase agreement calls for a contingent payment of up to $50 million and additional earn-out payments in 2005, 2006, and 2007—all based on financial performance. The purchase price is payable in cash and $20 million of Mega Bloks common shares at CA$ 19.00 ($15.34) per share.

In addition to becoming major shareholders, Lawrence Rosen, Rose Art’s president and CEO, and Jeffrey Rosen, executive vice president, will assume senior management positions in Mega Bloks. Lawrence will be senior vice president and chief marketing officer and Jeffrey will be executive vice president. In addition, Lawrence Rosen will be nominated to Mega Bloks’ board of directors.

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