UPDATE 1-Mega Brands shares sag after magnetic-toy recall

TORONTO, March 17 (Reuters) - Shares of Mega Brands Inc (MB.TO: Quote, Profile, Research, Stock Buzz) dived more than 12 percent on Monday after it issued a global recall of some of its toys amid concerns that magnetic parts could be swallowed or inhaled by children.

The voluntary recall, conducted in cooperation with the U.S. Consumer Safety Product Commission, includes MagnaMan action figures, as well as Magtastik and Magnetix Jr. Pre-School magnetic toys.

The recalled toys, the latest in a series of recalls over the past years, made up sales of about $7 million in 2007, Mega Brands said, and related costs of the recall will appear in its fourth-quarter results.

Mega Brands had recalled its Magnetix toys in 2006 and expanded the recall in 2007 due to the same safety problems. One child died and 27 suffered serious intestinal injuries at the time after swallowing the magnets.

Mega Brands said the magnets were hazardous if swallowed or inhaled by young children. If more than one magnet is swallowed, they could attract each other and cause potentially fatal intestinal tears or blockages.

The company was aware of 44 cases in the United States of magnets coming loose from the toys involved in the latest recall, including a 3-year-old boy who is receiving medical treatment to remove a magnet from his nose.

The recalls had caused shares of Mega Brands to plummet over the last year, and this was exacerbated by supply snags and problems integrating its Rose Art unit which it bought in 2005. The company recently said it was considering putting the unit back up for sale.

It plans to replace the Magnetix line in the third quarter of this year with a new toy called Magnext.

The company said the MagnaMan figures and the Magnetix Jr. sets were no longer in production, and that the design of the products occurred before the redesign of the Magnetix building set in 2006.