RC2 Corp.'s acquisition of the children's publishing division of Publications International Ltd. will allow the toy manufacturer to diversify the company's offerings while also providing more focus on its early-learning products, explained Curt Stoelting, CEO of RC2, in a conference call last week following the signing of a definitive agreement to buy the division for $163 million. The addition of books to its lineup of developmental toys will enable RC2 to stress the importance of reading in the learning process when promoting its line to mothers, the company's primary customers, Stoelting said. The purchase will also allow RC2 to develop new book products as well as products that work with its Learning Curve early childhood products. And while PIL's books are sold in many of the same big-box stores—such as Wal-Mart—where RC2's products are, the books are sold in a “different aisle,” Stoelting said. PIL's sales through bookstore chains will also add a new channel for RC2.
The acquisition is expected to close in July and the integration of the company will move quickly in the first few months. Stoelting expects about 100 publishing division employees to join RC2, mostly in the sales and marketing, creative/product development and licensing areas. Cost savings of $8 million to $10 million annually are expected to come from the back office, including the warehousing operation. The publishing team, which will move to new offices not far from its current location, will be a separate unit, but will work in collaboration with RC2's play teams, Stoetling said. All new titles will be published under the Learning Curve brand.
The purchase provided the first public look at the size of PIL's children's publishing group. Of the $112 million in sales for the year ended March 31, about 67% was generated by the company's electronic books; 13% came from its Story Books line; and the remaining 20% from traditional print books. Approximately 30% of the division's sales were in the international market, with international revenue growing at about a 10% annual rate compared to mid-single—digit growth for domestic sales. RC2 expects international sales to continue to outpace gains in the U.S.
Among the new products RC2 is excited about is Poingo, which has been under development at PIL and which will come out this fall. The Poingo package features a pen-shaped device that will activate words, music and sounds when placed over certain symbols in Poingo books. The starter set, which includes the pen and two hardcovers, will sell for $34.99, and individual books will be priced at $9.99.
