Kay-bee toys is bought for $315 million

Melville Corp. said Monday that it agreed to sell its Kay-Bee Toys chain, the nation’s No. 2 toy retailer, to close-out retailer Consolidated Stores Corp. for $315 million. The sale is

expected to heat up competition in an industry where smaller competitors are grappling to gain market share from leader Toys R Us. That is because Consolidated’s low-cost structure should

lower toy prices, which will bring more shoppers into Kay-Bee’s more than 1,000 stores, analysts said. “This should turn the toy business on its ear,” retail consultant Kurt Barnard said.

Rye, N.Y.-based Melville had planned to spin off Kay-Bee to shareholders as part of its plan to split into three publicly traded companies, which it announced in October. It was proceeding

with that plan, Melville said, but a third party approached it regarding a possible sale to Consolidated and it determined the sale would be in the best interests of its shareholders.

“Kay-Bee will benefit from the financial and other support Consolidated will provide,” said Stanley Goldstein, chairman and chief executive of Melville. For Columbus, Ohio-based

Consolidated, the purchase would add to its toy business, making it one of the biggest retailers of small toys. Kay-Bee had sales of about $1 billion last year. It currently operates 113 Toy

Liquidators, Toys Unlimited and Amazing Toy Store close-out stores. Consolidated also operates other close-out stores, including 547 Odd Lots and Big Lots and 145 All for One and It’s

Really $1.00 stores. The sale price for Kay-Bee includes $215 million in cash and $100 million in a Consolidated Stores four-year subordinated note. The purchase is subject to regulatory

approval and customary closing conditions. It is expected to close in early May. Aside from the sale of Kay-Bee, Melville has also completed the sale of its off-price Marshalls chain to TJX

Cos. and closed more than 280 of the 330 underperforming stores it had targeted. The news was released after the market closed. Melville shares fell 37.5 cents to $33.50 and Consolidated

shares dipped 37.5 cents to $26.25. Both trade on the New York Stock Exchange. MORE TO READ