August 7, 2008 / 10:38 AM / in 10 years

UPDATE 1-Tomy to seek possible acquisitions in China, U.S.

(Adds details)

By Mariko Katsumura

TOKYO, Aug 7 (Reuters) - Japan’s Tomy Co (7867.T) will seek potential acquisitions in China or the United States in three years, as the world’s fourth-biggest toymaker aims to boost its competitiveness with a bigger global presence, its president said.

Tomy, owned 14 percent by U.S. private investment firm Texas Pacific Group (TPG) [TPG.UL], also aims to double its profitability as the firm faces a stagnant toy market in Japan amid a rapidly ageing population.

Intensifying competition with global rivals such as Mattel Inc MAT.N and Hasbro Inc HAS.N has also been challenging for Tomy, known for its Beyblade spinning tops, Transformers toy series and Tomica miniature vehicles.

Tokyo-based Tomy is better known in Japan as Takara Tomy following a merger with rival toymaker Takara in March 2006. To improve its financial health and receive global business guidance, Tomy accepted a 7 billion yen ($63.96 million) investment from TPG in March 2007.

“Following the merger we underwent a period of some internal confusion. But things have stablised and we’ll be more prepared in a few years time for further (business) growth,” Kantaro Tomiyama, the company’s president and chief executive, told Reuters in an interview.

“That’s when we’ll make a comprehensive investment overseas in China or in the United States ... like buying a U.S. company,” he said.

He added that Tomy has been studying such opportunities with advice from TPG and that the amount would likely be significant.

Tomy is also in talks with potential partners to air the Beyblade anime series in Asia as early as next year, a move aimed at further boosting sales of the spinning tops, he said.

Last week, the toymaker more than doubled its group net profit forecast for the six months to September, citing a recovery in sales and profitability at the parent company. [ID:nT50OCF86S]

Still, its projected sales of 197 billion yen this year are about one-third those of Mattel, the world’s top toy company.

Tomiyama said there was a lot to learn from Mattel and Hasbro.

“With a good procurement and marketing strategy, they can easily achieve double-digit profitability,” he said. “But I think we should be able to do that, making full use of our merger benefits (with Takara).”

Tomiyama said the company aims to double its parent-only operating profit margin to 10 percent in the year ending March 2011 from 5.3 percent last business year by reducing the number of its products.

The company is also shifting its manufacturing base to Vietnam, Thailand and Indonesia from China to cut costs and to improve quality, said Tomiyama.

“TPG’s investment is putting us under a certain kind of pressure,” said Tomiyama. But he said the U.S. fund has also been helping it with speedy decision-making and a global business strategy. ($1=109.44 Yen) (Reporting by Mariko Katsumura; Editing by Chris Gallagher)

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