Toys R Us 800 million IPO

Walmart has crushed the Toys R Us model.

they've crushed far too many models...

I don't agree with that. Toys R Us is a category killer, i.e. they have every kind of toy under the sun, or at least they used to. Best Buy and Bass Pro Shops / Cabela's strike me as two other "category killers" that specialize in one product and are still doing fairly well, but in their case it is electronics & sporting goods. They just have to get kids to beg their parents to take them to Toys R Us again, maybe take a page out of Chuckie Cheeze's advertising?

"In addition to Goldman, the bookrunners include JP Morgan, Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank Securities, Citi and Wells Fargo Securities."

fuking ubs still no dealz on anything

Toys R Us got killed because because of high fixed costs and too many indirect competitors. It was not just Wal-Mart that hurt Toys R Us, but Amazon, Ebay, Best Buy, Game Stop, ect. Toys R Us may have every toy under the sun, but it survives by selling the top ten toys of the year/season in bulk to help subsidize the cost of keeping less liquid toys in the store. All of those indirect competitors diluted Toys R Us's market share in those top selling toys and were able to offer better prices than Toys R Us because they were able to specialize and gain a competitive advantage in a particular product.

I loved Toys R Us for two reasons, the RZone and nerf guns. The Rzone was just a small game stop and you had a larger selection of nerf guns online.

Seems like a fairly transparent GTFO exit strategy for KKR and Bain. Toys R' Us underperformed in the years leading up to the buyout, and every indication would lead one to believe that they're no prize now (shutting down 87 stores, overhauling others to Babies R' Us locations). It'll be really interesting to see the pricing on the IPO in this situation.

This is what I am talking about.... Real deal discussion with disparate, but still very insightful, opinions. A gazillion times better than the monotonous "is GS TMT > MS M&A" threads.... Although perhaps not quite as stimulating as some of the toilet ones...

Keep them coming guys!

Seems odd that they would IPO now with a retail recovery still a ways away (and in the summer, too). I certainly wouldn't buy into it.

Great company:

1. Kids under a certain age (the age when they want to have a lot of low tech toys) cannot shop online.

2. Toy retailers, like clothes retailers, sell products that people want to see and touch before buying.

3. It is a destination. Walmart only sells top toys for holidays, limited selection.

Great real estate.

Toys R Us dominates as a destination for Christmas, Birthdays, etc. Baby's R Us and FAO are big growth areas, currently small --- KKR and Bain kept them on the backburner I guess.

Bank of America Merrill Lynch was on the high yield issuance for Toys R' Us last summer. It seems as though KKR bought the company as an Opco/Propco deal, where the real estate was where the true value of the company was. After the subprime debacle, the Babies R' Us business and international expansion has been where the only hope for the company lies. All of the Property Company's assets are now encumbered according to public debt filings.

Bank of America Merrill Lynch was on the high yield issuance for Toys R' Us last summer. It seems as though KKR bought the company as an Opco/Propco deal, where the real estate was the true value of the company. After McDonalds, Toys R' Us may be one of the only large stores in the U.S. that owns over 50% of its locations. After the subprime debacle, the Babies R' Us business and international expansion has been where the only hope for the company lies. All of the Property Company's assets are now encumbered according to public debt filings.

Bank of America Merrill Lynch was on the high yield issuance for Toys R' Us last summer. It seems as though KKR bought the company as an Opco/Propco deal, where the real estate was the true value of the company. After McDonalds, Toys R' Us may be one of the only large stores in the U.S. that owns over 50% of its locations. After the subprime debacle, the Babies R' Us business and international expansion has been where the only hope for the company lies. All of the Property Company's assets are now encumbered according to public debt filings.

As I understood it, the value-add of the Toys R Us model was stuff like this: http://www.nytimes.com/2009/12/19/business/19toys.html?_r=1

Finding/creating/marketing new categories for popular toys and then cornering the market and enjoying fat margins. Amazon, Wal-Mart, etc, can sell toys, but the value proposition of Toys R Us is employing expertise to be at the vanguard of the toy world trends.

In the article it says the 3 PE firms own 98.2% of ToysRUs, does anyone know specifically the breakdown ?

NEW YORK, May 28 (Reuters) - Toys R Us [TOY.UL] filed to raise as much as $800 million in an initial public offering in what could mark its return to the public markets after five years.

But investors' appetite for Toys R Us, which was taken private in 2005 by Kohlberg Kravis Roberts & Co (KKR.AS), Bain Capital, and shopping center operator Vornado Realty Trust (VNO.N) in a $6.6 billion deal, will depend on how much of the money raised will go to its current owners and how much will go to fund growth.

Those three companies collectively own 98.2 percent of Toys R Us, but the prospectus filed on Friday with the U.S. Securities and Exchange Commission did not specify whether they would shed any of their stakes in the eventual IPO.

Toys R Us, based in Wayne, New Jersey, said only in the filing that it plans to use the net proceeds of the offering to pay down some of its debt, without getting into specifics.

A recent slew of private-equity backed IPOs have flopped because they were seen as exit vehicles for buyout firms. Toys R Us and its underwriters will have to price the IPO sensibly and make clear it will leave the retailer equipped to compete with other retailers, an analyst said.

"Right now, I don't believe there is a good market whatsoever for private equity backed companies. It's hard enough to launch an IPO, but much tougher for a debt-laden company," said Scott Sweet, a senior managing partner with IPO Boutique.

Toys R Us' long-term debt load of $5.2 billion could be a turn-off for investors, Sweet said.

The filing did not specify the number of shares, or a price range estimate, information that typically comes in shortly before an IPO is launched. Nor did it provide an approximate timing for the stock flotation.

For now, Friday's filing is likely to be a "trial balloon" to allow the underwriters, led by Goldman Sachs (GS.N), to gauge investor appetite for the IPO, according to various pricing scenarios, Sweet said.

Given the recent spike in stock market volatility, which makes IPOs very hard to launch, a Toys R Us IPO is likely to be "months away," Sweet said.

STABLE SALES, BETTER PROFIT

Toys R Us is the largest specialty toy store in the United States but has faced stiff competition from retailers such as Wal-Mart Stores Inc (WMT.N), Amazon.com Inc (AMZN.O) and Target Corp (TGT.N).

Toys R Us operates 1,363 stores around the world under its own name, as well as the Babies R Us and FAO Schwarz chains, making it one of the more prominent names in the U.S. pipeline.

But Sweet warned name recognition alone is not enough to whet investor appetite. Investors typically want to see fast sales and profit growth to justify taking on riskier IPO stocks.

Toys R Us sales have been stagnant for a number of years. In the fiscal year ended in February 2007, sales were $13.1 billion, and had only risen to $13.6 billion last year.

But during that period, its net profit nearly tripled to $312 million, as the retailer cut back on costs and kept its store count relatively stable.

It has shown some signs that sales were perking up late last year. Sales at stores open at least year, a retail gauge known as same-store sales, were up 4.6 percent in the United States in the key holiday selling month of December.

In addition to Goldman, the bookrunners include JP Morgan, Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank Securities, Citi and Wells Fargo Securities.