ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, October 3, 1996 TAG: 9610030043
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: NEWARK, N.J.
SOURCE: Associated Press
THE PURCHASE OF AMERICA'S largest chain of infant-product stores boosts the toy giant's move into the baby supply realm.
Toys R Us Inc., the nation's leading toy retailer, took a major step in expanding its fledgling Babies R Us division Wednesday with a $376 million deal to buy the country's largest chain of infant-product stores.
The Paramus, N.J.-based company said it would acquire Baby Superstore Inc. of Duncan, S.C., in a stock swap subject to regulatory and shareholder approval.
``We just started our own division, and we think this is a phenomenal marriage,'' said Louis Lipschitz, Toys R Us' chief financial officer. ``What it does is accelerates our expansion.''
The toy retailer opened its first of three Babies R Us stores in May with products geared toward infants and toddlers and expects to have at least seven by the end of the year. Baby Superstore has 70 stores in 21 states, including one in Roanoke.
``It takes the two potentially major players in the field and brings them together, which greatly reduces the competition either one of them as an independent would face,'' said retail analyst Donald Trott of Dean Witter Reynolds Inc.
While the 25-year-old Baby Superstore is the leading chain of its type, the company has had a tough year with disappointing earnings.
Under the proposed deal, which is expected to close by the end of January, Baby Superstore shareholders would receive 0.8121 of a share of Toys R Us stock for each Baby Superstore share.
Baby Superstore founder Jack Tate, who also serves as chairman and chief executive, would receive 0.515 of a share for each Baby Superstore share and would become the largest individual shareholder of Toys R Us.
The company, which was known as Carolina Baby before it went public in 1994, adopted the superstore format in 1988.
Trott noted that the merger would be a small portion of Toys R Us' business. While sales for Baby Superstore are expected to top $450 million this year, Toys R Us is projected to have overall sales of more than $10.8 billion.
Toys R Us underwent a restructuring this year and has been revamping its toy stores while opening new superstores to compete with discount retailers such as Wal-Mart, Target and Kmart.
Industry analyst Jack Trout of Trout & Partners in Greenwich, Conn., questioned the company's decision to move into what he called a limited market compared with toy and office supply superstores.
``They have enough problems with discount guys moving into the toy business, much less opening up another front here on babies,'' Trout said.
Toys R Us is the world's largest retailer of children's products, operating 651 toy stores in the United States, 366 international toy stores and 211 Kids R Us children's clothing stores.
LENGTH: Medium: 61 lines ILLUSTRATION: PHOTO: (headshot) Jack Tateby CNB