Toymaker who tried to keep Toys R Us alive says new version of company is dead to him

The toy mogul who had launched a campaign to keep Toys R Us alive — only to face rejection — says the newly resurrected U.S. version of the retailer is dead to him, and that he will not sell his hit toys to them.

Isaac Larian, the chief executive of MGA Entertainment, the company that created the current runaway best selling toy called L.O.L. Surprise, and the man who gave the world the Bratz dolls 17 years ago, said the lenders that pushed Toys R Us into liquidation will not get the chance to sell his merchandise when they unveil a new company with the Toys R Us names — and mascot.

Larian reacted to news this week that the distressed asset investment groups, including Solus Asset Capital Management, and Angelo Gordon & Co., plan to retain the Toys R Us brand names and intellectual properties and use them to create new stores in the United States. The investment funds plan to retain the brand names and intellectual properties in all countries expect for Canada, The Canadian division was sold off previously and is a separate entity, with Toys R Us branded stores that are profitable.

The lenders' first move has been to create a wholesale business, Geoffrey's Toy Box. That company is exhibiting at the Dallas toy show this week.

Short-term gains

Larian said the news is another sign that the lenders and other financial firms never intended to save the company, but planned all along to dismantle it and keep the best parts for themselves, for their gain.

"I am so angry," Larian said. "This is unbelievable - 33,000 people lost their jobs, more than that. They destroyed a brand that's been around for 70 years for their short-term ... gains." 

Back in March, Larian received national attention when he offered to buy the American and Canadian businesses of Toys R Us, and said he would raise money from investors and a crowd-funding campaign on the internet. The campaign took off, with parents and even Toys R Us kid-customers making individual contributions of $10, $50, or more.

A $300 million gift

Larian had pledged that he would keep hundreds of stores open and would make them more fun and experiential, like Disneyland. He ultimately offered $891 million in his bid, but Toys R Us lenders and bankruptcy advisers rejected the offer as too low.

Larian said the company's advisers told him the intellectual property rights alone were worth $300 million to $400 million. By retaining those rights, the lenders "are basically giving themselves a $300 to $400 million gift," he said.

Now, "MGA for one will never give them credit or do business, because they're not reliable people," Larian said.

He said he won't sell his toys to them even if they pay cash in advance. "For me it's a matter of principle," he said.

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Larian said that decision only applies to the new ventures backed by Solus and the other investment funds. He continues to sell to Toys R Us Canada. He said MGA is "doing great business" with the Toys R Us Canada stores under the leadership of Toys R Us Canada President Melanie Teed-Murch, and that his company is "giving full support" to the Canadian stores, which are no longer connected to the U.S. operations.

Larian has some leverage in a toy war with a retailer. MGA Entertainment's L.O.L. Surprise series of collectible toys — where part of the fun is unwrapping the packaging and discovering the dolls and accessories hidden inside — was a top seller last year and has continued to lead the sales charts in 2018.

Another MGA Entertainment toy, Poopsie Slime Surprise, which combines collectibles with the craft activity of making slime, is another best-seller. 

Toy industry expert Jim Silver said he expects most manufacturers will be wary about selling to Geoffrey's Toy Box, or any new version of Toys R Us, and that they will sell only if they are confident they will be paid.

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Selfies with Geoffrey

At the annual fall Dallas toy show this week, the Toys R Us giraffe mascot Geoffrey walked the aisles and posed for photos with manufacturers to advertise Geoffrey's Toy Box and spread the word that Toys R Us is returning in a new form. 

Michael Rinzler, founding partner and co-president of Pennsylvania-based Wicked Cool Toys, said he's cautiously optimistic that the latest news from Toys R Us could lead to more toy stores. "We're definitely interested in seeing what it's all about," said Rinzler, who is attending the Dallas show. "I think we have the potential to sell to them." 

News about Geoffrey's Toy Box has generally been received in a positive way among toy manufacturers at the Dallas event, Rinzler said. "Consumers definitely miss and have a love for Toys R Us and the industry needs it."

Larian, however, doesn't think the lenders backing the new venture will be in the toy business for the long haul. "What they plan to do is another short term thing to put more money in their pocket," he said. 

The lenders group declined a request to speak with a company representative who could talk about the plans for the new venture.