Big changes with Thomas again took place in 2011 culminating in the fall with the announcement that toymaker Mattel had successfully acquired HiT Entertainment. A selection of media articles detailing the takeover are provided below*:

Thomas the Tank Engine teams up with Barbie as Mattel buys Hit
Many of Britain's best-loved children's characters will now be under control of the US toy giant after £426m deal

Mark Sweeney - The Guardian
Monday 24 October, 2011

Thomas the Tank Engine is to become firm friends with Barbie after US toy company Mattel paid $680m (£426m) cash to buy the firm behind a number of the nation's best-loved kids characters.

Mattel, owner of brands including Hot Wheels and Fisher-Price, has been the frontrunner to buy Hit from private equity parent Apax Partners since the summer.

The acquisition will add preschool favourites such as Barney the purple dinosaur, Fireman Sam and Angelina Ballerina to the ranks of the world's largest toymaker. Apax acquired Hit, which is chaired by former BBC director-general Greg Dyke, in 2005 for £490m. At the time, that would have translated to $890m. This means that the company has on paper made a loss in the order of $200m on the deal. The purchase price equates to a multiple of about 9.5 times earnings.

The sale of Hit marks the first move in what looks set to be something of an exodus of some of the nation's best-loved characters. Chorion, the owner of Noddy, Mr Men and the Agatha Christie franchise, is in the process of being broken up and sold after failing to renegotiate banking deals to alleviate its £70m debt.

Last month Lord Waheed Alli, the former chairman of Chorion, snapped up the rights to The World Of Beatrix Potter and The Octonauts through a new company called Silvergate Media. However, many of Chorion's other assets, which include Paddington Bear, Enid Blyton's Famous Five and the estate of writer Raymond Chandler, could well go to foreign owners.

Peppa Pig, currently the most popular character with British preschool children, is also likely to fall into US hands. Peppa's London-listed owner Entertainment One has hired investment banks to conduct a sale after receiving approaches.

Hit's eventual sale price is some way below initial expectations, with a price tag as high as £1bn touted when the news first emerged of its potential sale and a raft of bidders touted as being interested.

However, concerns over tough economic conditions dampened buyer interest in media and entertainment stocks. "Mattel is the right home for Thomas & Friends," said Mattel chief executive Robert Eckert.

The durable Thomas franchise is the jewel in the crown of Hit's portfolio, which make in total about $180m a year in revenues globally, and was the prime driver of Mattel's desire to strike a deal.

The two companies already share a close working relationship, with Mattel marketing many Thomas & Friends toy products under licence in a deal that runs until the end of 2014. Mattel added that "more than half" of the revenue generated from the Thomas franchise comes from non-toy products. "Fisher-Price already produces Hit's toys under licence so the two companies know each other well and there is considerable industrial logic in this combination," said Irina Hemmers, a partner in Apax's media team.

Global sales of the Thomas toys exceed $150m a year and it now plans to "continue to expand and grow these product lines into the foreseeable future". Mattel said it would aim to grow in newer markets such as Asia and Latin America and the toymaker has pledged that it will continue to back the development of TV programmes. " keeps the brand fresh, relevant and performing well," the company said.

Mattel would not be drawn on plans for Hit's other brands, except to say that each would be looked at on a "case-by-case basis" – after plans for Thomas are implemented – to develop them "internally or through the right partnerships".

Thomas's Barbie takeover shows the future is plastic
and American Hit Entertainment, home to Thomas the Tank Engine, is sold to US toy maker Mattel, marking near-collapse of UK children's character companies

Don Sabbagh - The Guardian
Monday 24 October, 2011

Hit Entertainment becomes the latest British media company to fall into overseas hands, after the owner of Thomas the Tank Engine fell went to Barbie, or rather its owner Mattel. Its spell under the ownership of private equity house Apax, which has struggled with many of its media deals, has not been particularly successful. But Hit is hardly alone: the collapse of the once vibrant children's character sector has shown that a combination of optimism plus debt is not enough to rescue media businesses in decline.

Apax paid £490m to take Hit private in 2005. Progress has been sticky since. Turnover was $249m in the year to July 2009, according to the last set of Companies House accounts; Mattel wouldn't say much yesterday, but indicated that annual revenues were now more like $180m. Underlying profits did rise from £33m in 2004 to $80m (£49m) in 2010 – but fell back to $71m as implied by Mattel's statement that it was prepared to pay a fairly healthy 9.5 times underlying earnings to Thomas and friends.

Unfortunately, that did not match the pre-credit crunch 14.7 times that Apax paid. When it bought the business for £490m, or $890m at the prevailing exchange rate, it took on $550m of debt, leaving about $340m in equity (the decision to switch to dollars was always done in the hope of attracting a US buyer). Published accounts and leaks to the press suggest borrowings are $500m, which would leave Apax somewhere less than $180m once all the fees have been taken into account. To summarise that looks like $340m turned into $180m (efforts to check this with Apax as per usual got no response.)

What went wrong? Like Chorion and Entertainment Rights before, too much debt was a factor. But Hit could just about manage its debt load. A failure to come up with successful new characters didn't help, but that is nothing like as easy as one might think either. However, when borrowings are high, there is pressure to achieve growth, and that did not happen. At the same time, the children's TV market changed.

Too many kids' characters were chasing too few TV slots, and if you are not on television, then no screaming toddler is going to want the toys in the shops. Broadcasters demanded tougher terms from children's producers – making the producers more reliant on "back end" sales of DVDs and toys. Except DVDs are in decline, and toys meant direct competition with the US juggernauts: Disney, Hasbro and, of course, Mattel.

That Hit has been bought at all is testimony to the enduring power of Thomas, who has survived several changes of ownership and the frankly tedious stories. Mattel said Thomas represented "two-thirds" of the company's value. But that it has been bought by a large US toy maker says even more: these are no longer children's characters on television, but instead children's toys that happen to be on television.

Mattel buys Hit Entertainment for $680m cash
Thomas the Tank Engine and Bob the Builder have a new home after the US toymaker finally purchases Hit

Mark Sweeney - The Guardian
Monday 24 October, 2011

Hit Entertainment , home to children's TV favourites Thomas the Tank Engine and Bob the Builder, has been acquired by US toymaker Mattel for $680m (£426m) in cash. Mattel, which owns assets including Barbie and Hot Wheels, has been the frontrunner to buy Hit from Apax Partners since the summer. Apax acquired Hit Entertainment, which makes about $180m in revenue annually, in 2005 for £490m. At the time, that would have translated to $890m.

This means that the company has on paper made a loss of about $200m on the deal. The purchase price equates to a multiple of about 9.5 times earnings.

"Mattel is the right home for Thomas and friends," said the Mattel chief executive, Robert Eckert.

Thomas the Tank Engine is the jewel in the crown of Hit Entertainment's portfolio of pre-school brands, which also includes Barney, Fireman Sam and Angelina Ballerina.

"It is fitting that the world's premier toy company should become the owner of the world's premier pre-school property," said the Hit Entertainment chief executive, Jeffrey Dunn. "Mattel is a wonderful steward of brands and a great home for the outstanding properties Hit has developed and grown."

The two companies already share a close working relationship, with Mattel marketing many Thomas & Friends toy products under licence in deal that runs until the end of 2014.

Mattel said that "more than half" of the revenue generated from the Thomas the Tank Engine franchise comes from non-toy products.

"[Mattel-owned brand] Fisher-Price already produces Hit's toys under license so the two companies know each other well and there is considerable industrial logic in this combination," said Irina Hemmers, a partner in Apax's media team.

Mattel said that the global sales of the Thomas toys exceed $150m a year and it now plans to "continue to expand and grow these product lines into the foreseeable future".

The acquisition does not include Hit Entertainment's stake in US cable TV network Sprout.

Mattel said that the deal is being funded by a combination of cash and debt and will not have a material impact on the company's 2012 earnings.

Bank of America Merrill Lynch acted as financial adviser to Hit Entertainment. RBC Capital Markets acted for Mattel.

* Media article text on this page reprinted under the Fair Use Doctrine of International Copyright Law as educational material without benefit of financial gain, with web links back to original source.