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Max Rangel, the President and CEO of Spin Master Corp., at the company's Toronto headquarters on Oct. 11.Cole Burston/The Globe and Mail

Spin Master Corp. TOY-T said it will acquire U.S.-based toy maker Melissa & Doug for US$950-million, the largest takeover in the company’s history.

“We have admired Melissa & Doug for many years,” said Spin Master chief executive officer Max Rangel at a news conference at the company’s Toronto headquarters on Wednesday.

Spin Master – which courted the wooden toy maker from parent company AEA Investors – will finance its acquisition with approximately US$450-million in cash and US$500-million in debt financing. The deal is expected to close in the first quarter of 2024.

The deal to buy Melissa & Doug will add a brand of creative and developmental toys for parents seeking screen-free play, Spin Master said. Melissa & Doug recorded about US$490-million of sales in 2022.

“The brand aligns well with ours,” Spin Master co-founder Ronnen Harary told The Globe and Mail. “Its reputation for building heirlooms is felt by the end consumer. You can see it in the customer reviews, which was part of what attracted us to them.”

Melissa & Doug has a 35-year history in the toy department. Co-founders Melissa Bernstein and her husband, Doug, began the brand in 1988 and have since expanded their portfolio of plush and wooden toys and puzzles to be included in multiple specialty and big-brand retailers including Walmart and Indigo.

The company will remain its own stand-alone brand under the Spin Master family, said Mr. Rangel.

The Bernsteins “will be advisers to us when we need them to but they will not be in the day-to-day operations of the combined entity,” he added.

Spin Master said it plans to expand Melissa & Doug’s market through Spin Master’s international footprint of 26 global offices, including in Britain, China and Australia.

Spin Master makes games and creative experiences through three segments: toys, entertainment and digital games. Its largest brands include PAW Patrol, Hatchimals, Rubik’s Cube and Gund.

Despite its growing portfolio, Spin Master continues to trade below prepandemic levels. The company’s revenue dropped by 24.9 per cent in the fourth quarter of 2022, which it reported in March this year. Its toy and digital games segments took the largest hit, reporting a 26.8-per-cent decline and a 24.2-per-cent decline to US$396.7-million and US$37.9-million, respectively.

Despite that, Spin Master remained bullish on its outlook for 2023 near the start of the year. “Entering into 2023 we are expanding our core toy portfolio with innovation, driving our franchises and building our licensed partner portfolio,” said Mr. Rangel in a news release in March.

In its entertainment segment, Spin Master’s PAW Patrol: The Mighty Movie debuted in theatres in September, featuring a cast of Hollywood actors including Kristen Bell, Taraji P. Henson and James Marsden. The sequel to the 2021 animated hit topped the North American box office, earning US$23-million in its opening weekend ­– making it the largest North American opening for a Canadian film in more than a decade.

The company will report its third-quarter 2023 results on Nov. 1.

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