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Deals from Hell by Arthur Levitt Jr., Robert F. Bruner

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11
May 1999: Mattel’s Acquisition of The Learning Company

MATTEL’S ANNOUNCEMENT OF THE DEAL

Jill E. Barad was a standout figure in an industry that depended on the ability to stand out. As CEO of Mattel Inc.,1 a leading toy manufacturer, she could dictate trends. One of the few women leading a Fortune 500 company, she assumed near-iconic status as a role model for other women. She was style-setting industrially and personally, with movie-star charisma and fashionable attire. Having joined Mattel in 1981 as a product manager, she rose through the marketing ranks at Mattel and proved that she could win a customer, close a sale, and build business. And at 48 years old, she was comparatively young for a CEO.
On December 14, 1998, Barad announced that Mattel would acquire The Learning Company (TLC) for about $3.82 billion in stock, a deal she declared would be accretive to earnings in 1999. The acquisition was described as a turning point in the strategic direction of Mattel. She told journalists, “This isn’t a bet on the Internet. It’s a bet on technology and how we are going to communicate to customers.”3 She expressed the possibility that the firm might use TLC’s leading figure, Reader Rabbit, as the basis for an interactive doll, or that a line of educational software might be created around Mattel’s Barbie doll. Barad said, “Today, the computer—that’s [the kids’] play, that’s where they are spending their time.”
In the same news conference, she also announced that Mattel’s ...

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