KKR, Bain spend $6.6bn in Toys R Us

The private equity firms have reportedly ended the seven-month auction for the US’ second-largest toy retailer by acquiring the whole company for $6.6bn.

A consortium comprising private equity firms Kohlberg Kravis Roberts and Bain Capital along with Vornado Realty Trust have agreed to acquire toy retailer Toys R Us for $6.6 billion (€4.9 billion) according to a report in The Wall Street Journal.

The sale of the entire company represents a change in strategy as the specialty retailer had originally been in discussions for the sale of its toy division only and had been expected to retain its more profitable baby products division Babies R Us.

The consortium won out after a $5.5 billion bid from distressed buyout specialists Cerberus for the whole company was rejected last month.

The winning bid represented a premium of eight percent to the $24.77 closing stock price of Toys R Us yesterday. Sales at the company have been falling from $7 billion in 2000 to $6.3 billion in 2003 – partly due to increased competition in the sector.

Retail giant Wal-Mart’s market share of the US toy business has grown from 11 percent in 1993 to 25 percent last year, while Toys R Us’ share has declined from 21 percent to 17 percent in the same period.

Market observers anticipate that while the profitable Babies R Us franchise will be kept intact, a number of Toys R Us stores, in prime retail locations, will be sold off.

A spokesman for KKR declined to comment on the transaction.