LeapFrog to be bought by VTech in shake-up for toy industry

[NEW YORK] LeapFrog Enterprises Inc, the long- beleaguered maker of children's electronics, will be acquired by Hong Kong's VTech Holdings Ltd for about US$72 million.

VTech will pay $1 a share for LeapFrog, a 75 per cent premium over the stock's last closing price, according to a statement on Friday. The transaction will take the form of a cash tender offer, beginning in early March.

LeapFrog, founded more than two decades ago, helped pioneer the market for educational electronics, selling a range of tablets and other handheld gadgets. But the Emeryville, California-based business struggled to compete with technology companies like Apple Inc, as well as toy-industry rivals. A broader slump in the tablet market further squeezed the company, and its LeapTV video-gaming platform failed to catch on.

The deal's announcement follows speculation of other consolidation in the toy industry. Mattel Inc and Hasbro Inc, the market leaders in the US, have discussed merging, Bloomberg News reported this week.

LeapFrog jumped as much as 71 per cent to 97 cents in New York, near the deal price. Before Friday, shares of the money- losing company had been down 20 per cent this year and 85 per cent in 2015.

For VTech, the transaction helps tighten its grip on the category of educational technology. The company sells tablets, smartwatches and gaming consoles with a focus on learning.

"The acquisition will allow us to offer the broadest portfolio of products that enhance the education and development of children," Allan Wong, VTech's chief executive officer, said in the statement.

BLOOMBERG