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Amazon Has Considered Buying Some Toys ‘R’ Us Stores

bloomberg.com

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Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#71

Post by ars »

ceejayoz wrote: post #29
MadBohr wrote: post #17

Earlier quoted context omitted.

It's important to note that a lot of the failure of Toys R Us has to do with private equity buyout rather than a poor business model. Of course, their business model was flawed, but remember that Toys R Us was bought in 2005, and the toy market was MUCH simpler back then. Amazon was hardly the player it is now. The private equity firm then loaded them up with crippling debt. Move forward a few years, and enter Amazon…

Cite for the above: https://www.bloomberg.com/news/articles/2018-03-16/who-kille... Buy company. Take out massive debts on company's books. Withdraw hundreds of millions in "fees". Let company collapse. Rinse, repeat.

Claire's and Sears were killed by the exact same thing.

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#72

Post by rubicon33 »

MadBohr wrote: post #17
vinhboy wrote: post #11

I think Amazon should do it. I personally believe Toys R Us just missed an opportunity to run a proper business. They have a ton of retail space, but every time I've been there, it's run like Walmart. Shit everywhere, no one to help you find anything, etc... There's nothing suburban parents like me want more than an indoor play space for my kid (for extremely hot or cold days). If they properly utilized their store a…

It's important to note that a lot of the failure of Toys R Us has to do with private equity buyout rather than a poor business model. Of course, their business model was flawed, but remember that Toys R Us was bought in 2005, and the toy market was MUCH simpler back then. Amazon was hardly the player it is now. The private equity firm then loaded them up with crippling debt. Move forward a few years, and enter Amazon…

Can you or someone else explain to me why a firm would buy a company, and then "load them with debt"?

Was the debt intended to help them grow?

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#73

Post by ikeboy »

jobu wrote: post #27
vinhboy wrote: post #11

I think Amazon should do it. I personally believe Toys R Us just missed an opportunity to run a proper business. They have a ton of retail space, but every time I've been there, it's run like Walmart. Shit everywhere, no one to help you find anything, etc... There's nothing suburban parents like me want more than an indoor play space for my kid (for extremely hot or cold days). If they properly utilized their store a…

> I personally believe Toys R Us just missed an opportunity to run a proper business. Toys R Us has been struggling to pay off $6 billion in debt from the Bain Capital takeover in 2005. They didn't have the capital or the margins to invest in maintaining their stores, let alone competing with Amazon. Buying a company with debt and then forcing that company to pay off that debt is fairly common, but for some reason it…

It's not mom and pop lenders that put up 6 billion. It's grownups that have a contract with a specific set of things/entities they can collect from. Don't waste tears over them.

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#74

Post by 0x4f3759df »

vinhboy wrote: post #11

I think Amazon should do it. I personally believe Toys R Us just missed an opportunity to run a proper business. They have a ton of retail space, but every time I've been there, it's run like Walmart. Shit everywhere, no one to help you find anything, etc... There's nothing suburban parents like me want more than an indoor play space for my kid (for extremely hot or cold days). If they properly utilized their store a…

Reminds me of the story of Disneyland:

"The concept for Disneyland began when Walt Disney was visiting Griffith Park in Los Angeles with his daughters Diane and Sharon. While watching them ride the merry-go-round, he came up with the idea of a place where adults and their children could go and have fun together, though his dream lay dormant for many years"

It seems like in this experience economy when we all have enough basic material goods, there should be a market for something like what your describing.

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#75

Post by Retric »

stupandaus wrote: post #55
jobu wrote: post #27

Earlier quoted context omitted.

> I personally believe Toys R Us just missed an opportunity to run a proper business. Toys R Us has been struggling to pay off $6 billion in debt from the Bain Capital takeover in 2005. They didn't have the capital or the margins to invest in maintaining their stores, let alone competing with Amazon. Buying a company with debt and then forcing that company to pay off that debt is fairly common, but for some reason it…

To answer your question, the debt holders take precedence over the equity holders like Bain Capital, and generally being an equity holder and having your equity stake wiped to $0 is not a good outcome for a private equity firm. Bain does have to pay off debts - that is what the liquidation of assets is being done for - to pay off debts to the debt holders. Bain doesn't get to keep those assets.

This assumes they occur post bankruptcy. Looting a company involves dept then dividends from selling off assets to the point a company can't make debt payments. The money is already gone by the time the company can't pay, so they don't care what happens to the shell at that point.

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#76

Post by joezydeco »

DanCarvajal wrote: post #2

I mean there has to be an non-dilapidated Toy 'R' Us location somewhere right?

The Canadian stores were very well kept and actually performed so well that MGA Entertainment (Bratz dolls, etc) was trying to get a group of other toymakers together to try and keep those stores open.

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#77

Post by mikeleeorg »

vinhboy wrote: post #11

I think Amazon should do it. I personally believe Toys R Us just missed an opportunity to run a proper business. They have a ton of retail space, but every time I've been there, it's run like Walmart. Shit everywhere, no one to help you find anything, etc... There's nothing suburban parents like me want more than an indoor play space for my kid (for extremely hot or cold days). If they properly utilized their store a…

Amazon seems only interested in buying the real estate, not the Toys R Us brand or business. Here's a quote from the article:

"The online giant isn’t interested in maintaining the Toys “R” Us brand, but has considered using the soon-to-be-vacant spaces for its own purposes, said the people, who asked not to be identified because the talks are private."

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#78

Post by sky_rw »

rubicon33 wrote: post #72
MadBohr wrote: post #17

Earlier quoted context omitted.

It's important to note that a lot of the failure of Toys R Us has to do with private equity buyout rather than a poor business model. Of course, their business model was flawed, but remember that Toys R Us was bought in 2005, and the toy market was MUCH simpler back then. Amazon was hardly the player it is now. The private equity firm then loaded them up with crippling debt. Move forward a few years, and enter Amazon…

Can you or someone else explain to me why a firm would buy a company, and then "load them with debt"? Was the debt intended to help them grow?

A leveraged buy out like the one Bain Capital used here is often used to milk cashflow and value out of a business that is in a bad position. They essentially seized on the opportunity that Toys R Us' bad decisions left them in to buy them with debt and use them as an ATM. I suspect that Bain didn't care about letting them grow, and saw this as an opportunity to bleed out all value from them for their remaining years until they could file for bankruptcy and liquidate.

Re: Amazon Has Considered Buying Some Toys ‘R’ Us Stores

#79

Post by mathattack »

martinald wrote: post #43
ceejayoz wrote: post #29

Earlier quoted context omitted.

Cite for the above: https://www.bloomberg.com/news/articles/2018-03-16/who-kille... Buy company. Take out massive debts on company's books. Withdraw hundreds of millions in "fees". Let company collapse. Rinse, repeat.

Are the companies that are writing these massive debts actually making money at the end of the day though? If that stops then the whole industry and practice will stop.

Generally yes. Otherwise they don’t do them. But when the market gets frothy, a bunch lose at once. (And the life insurance companies and pensions counting on them get hurt)
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