What's going on?

The Wall Street Journal reported late on Friday that toy giant Hasbro had made an offer to acquire rival Mattel, a deal that would combine the two biggest US toymakers � and marry up Barbie and G.I. Joe!

What does this mean?

Mattel�s stock price has dropped by almost half this year as profits have fallen. Its new CEO has embarked on a turnaround plan aimed at boosting sales and making its business more efficient. Meanwhile, Hasbro�s shares have gained almost 20% this year, partly thanks to toys associated with blockbuster movies such as Disney�s Star Wars franchise. A combination would allow the companies to cut costs and combine their resources to create toys that can compete for children�s attention in an increasingly tech-influenced world (see below).

Why should I care?

For the market: Shares of both companies jumped � but there�s no guarantee this deal gets done.

Mattel�s shares jumped more than 20% in late trading on Friday as investors assumed Hasbro would pay a premium to acquire Mattel (as is typical in a takeover). Hasbro�s shares jumped about 3%, suggesting investors think the idea is a good one. But it�s not clear that Mattel would play ball: for one, it may not want to sell itself at a relatively low price just as it begins its turnaround plan.


The bigger picture: Technology is a big threat to the traditional toy industry.

One of the biggest challenges facing Mattel, Hasbro and their European rival Lego is competing for kids� attention in a world dominated by iPads and other electronics. In a big nod to the challenges facing the industry, Mattel hired a senior Google executive to become its CEO earlier this year. She is focusing on, among other things, developing internet-connected toys and using feedback from the data collected to improve Mattel�s toys. Real-life toys still hold a lot of appeal for kids (and parents who don�t want their kids constantly watching screens). The challenge is incorporating technology to enhance the playing experience.