December 14, 1998 8:40 AM PST

Mattel to buy Learning Company

Toy maker Mattel today said it will acquire educational software maker the Learning Company for $3.8 billion in stock.

With its toy sales slumping, Mattel is hoping to push into the fast-growing education and entertainment software market.

The Learning Company has about $850 million in projected revenue for 1998, and is considered the world's second-largest consumer software company after Microsoft. The company produces such titles as Reader Rabbit, Myst, and Carmen Sandiego. In June, the Learning Company moved to acquire its rival Broderbund Software for about $420 million in stock.

Mattel added that the combined company will be the No. 3 market share leader in the entertainment software market.

The terms of the deal call for each outstanding share of the Learning Company common stock to be exchanged for $33 of Mattel common stock as long as the average price of Mattel common stock is between $27.5 and $33 for a 20-day period ending five days prior to the closing.

Shares of the Learning Company dropped 6.84 percent or 1.94 points to 26.38. The stock has traded as high as 32.81 and low as 13.78 during the past 52 weeks.

The $33 price represents approximately a 16 percent premium over the closing price of Learning Company stock on Friday, which was 30.125.

Mattel also said that its sales volume and earnings for the fourth quarter and year ending December 31 will be adversely impacted by a substantial decline in reorders from retailers despite strong sales over Thanksgiving.

The company also said that it expects its 1998 sales to be flat, and it expects to earn about $1.20 per share, a 33-percent decline from its prior estimate before a charge related to its recall of its "Power Wheels" product.

Analysts expected Mattel to earn 79 cents per share for the fourth quarter and $1.78 for the full year, according to First Call.

 

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