KB Toys sells KBToys.com to investors who are resurrecting the eToys brand

Monday, May 24th, 2004 3:21PM CDT

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Posted by: Seibertron Views: 21,978

KB Toys sells KBToys.com to investors who are resurrecting the eToys brand

KB Toys Inc. has sold KB Online Holdings LLC, operator of KBToys.com and eToys.com, to D. E. Shaw & Co. LP, a New Yorkâ€“based investment and technology development firm with $8 billion in aggregate capital. D.E. Shaw is renaming the company eToys Direct Inc. D.E. Shaw also bought the bankrupt FAO Schwarz in January.

D.E. Shaw acquired the inventory, equipment, leases, and proprietary technology as well as the eToys trademarks, URLs, and associated intellectual property. Former members of KB Online Holdings senior management will hold a significant minority equity stake in the new company. Michael J. Wagner will be the CEO of eToys Direct, which will be headquartered in Denver.

eToys Direct will own and operate the eToys web site and a 650,000-square-foot fulfillment facility in Blairs, VA, and will continue to operate KBtoys.com under a long-term licensing agreement with KB Toys.

"Weâ€™re excited at the prospect of growing the eToys Direct business, especially by expanding alliances with established online and catalog retailers," said Max Holmes, a managing director of D. E. Shaw and head of the firmâ€™s distressed securities group. "In addition, the acquisition will be an excellent complement to the online business of FAO Schwarz."

The sale price includes approximately $7.4 million in cash plus a minimum royalty payment to KB Toys, Inc. of $500,000 per year for the next three years. In addition, a wholly owned subsidiary of D. E. Shaw Laminar Portfolios has agreed to provide a $20 million line of credit to eToys Direct. The acquisition was approved by the U.S. Bankruptcy Court, District of Delaware on April 29.

"The sale of the Internet assets and licensing the www.KBtoys.com retail site are significant reorganization steps planned as part of KB Toys` restructuring process. The company now may focus on its core competencies of toy retailing and wholesaling," said Michael L. Glazer, CEO of KB Toys, Inc. "These transactions further reduce operating expenses and improve our financial position. We can now devote our efforts to positioning KB Toys stores for long-term success. We`re pleased that these arrangements allow our stores to continue to benefit from online branding and that our customers will continue to benefit from a KB Toys online retail presence."

This article was originally published at InternetRetailer.com.

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Credit(s): InternetRetailer.com