Mattel Inc. yesterday withdrew a $5.2 billion offer to merge with rival toy maker Hasbro Inc., saying Hasbro's "unbending stance" against the deal had made it impossible to complete the transaction in a timely and friendly manner.
In a third letter sent in the last week to Alan Hassenfeld, Hasbro's chairman and chief executive, John Amerman, Mattel's chairman and chief executive, said the "scorched earth" campaign Hasbro has waged since Jan. 23, when Mattel publicly disclosed that its offer had been spurned, "has created an intolerable climate."
A merger would have linked Mattel's highly popular Barbie doll, Hot Wheels and See 'N Say products with Hasbro's G.I. Joe, Candy Land, Play-Doh and Monopoly board game.
Deploying a phalanx of legal and political objections and obstacles to the merger, Hasbro had maintained that while the $52-a-share offer was financially tantalizing, it did not believe the combination would pass scrutiny with federal, state and foreign regulators.
In addition to airing arguments from its own lawyers about potential antitrust issues, over the course of the week Hasbro, based in Pawtucket, R.I., picked up support from Rhode Island's congressional delegation, its governor and state lawmakers.
On Monday, the state's two senators and two congressmen urged the Federal Trade Commission and the Justice Department to examine the proposed deal.
A day later, Rhode Island and Connecticut announced a joint investigation of the proposed merger, saying they were concerned that it would drive up toy prices.
And on Wednesday, the Rhode Island Legislature passed, and Gov. Lincoln Almon signed, a bill that deleted a provision in state law allowing owners of 10 percent or more of a company's stock to call a special meeting of shareholders.
Hasbro had argued that the change was necessary to prevent stock market speculators seeking quick profits from trying to force the company to accept Mattel's offer.
In previous letters over the past week, Mr. Amerman implored Mr. Hassenfeld to return to the bargaining table, saying Hasbro's concerns about the potential anti-competitive nature of the merger were not insuperable.
"Since we have not received any responses from Hasbro to the invitations for further discussions which I extended in my letters to you and in my letter to outside board members, it is clear such cooperation is not forthcoming," Mr. Amerman wrote yesterday.
In a letter to shareholders and Hasbro's 13,000 employees, Mr. Hassenfeld said he was "pleased" with Mattel's decision, and defended the company's actions.
"I am firmly convinced that our board did the right thing in unanimously rejecting their unsolicited proposal because of the very serious antitrust issues raised by it and the resulting very low probability that a transaction could be accomplished," he wrote.
On the New York Stock Exchange, Hasbro shares fell $6.125 yesterday, to $34.625. In the days after disclosure of Mattel's offer, the stock traded as high as $46.75. Mattel shares rose $1.25, to $33.625.
Analysts praised Mr. Amerman for avoiding a lengthy and costly effort to win Hasbro, and said Mattel emerged relatively unscathed. But they said Hasbro's successful battle to remain independent had longer-term implications.
Gary Jacobson, an analyst at BT Securities, said: "Hasbro is left with repercussions that will change this company. It is not the same company it was two weeks ago, because someone put a 73 percent premium on its previous market value. The onus is on Alan Hassenfeld to show why he turned that down, and to enhance value for shareholders."
Mr. Hassenfeld indicated that he had gotten the message.
He concluded his letter yesterday by saying: "I pledge to you as chairman and chief executive that, together with our management team, we will continue to do everything in our power to build greater values for all of our shareholders, employees and other stakeholders."