KB, Bain Capital and Romney; toys and politics
From Gifts and Dec
KB Toys was a retailer that seemed to stay around long after it was dead. This chain of mall based toy stores struggled for years as it searched for a business model that would return it to its glory years when shopping malls were the rage and consumers had not yet become as obsessed with price.
It appears that, like in one of those mummy movies, KB has just sat up in its grave, drawn back to our world by the 2012 election. Mitt Romney, the Republican Presidential candidate, is one of the founders of Bain Capital, a private equity and venture capital investment company. Bain owned KB when it closed its doors under a bankruptcy filing in 2008. The bankruptcy of KB had an impact on the toy industry: 3,000 people lost jobs and a number of toy companies and sales representatives were negatively impacted.
I am going to let others discuss the political implications of Bain, KB and the election. I do think, however, that we are remiss in not analyzing the impact that Bain has had on the toy industry. After all, Bain has owned or owns the number one and number 2 toy chains: Toys R Us and KB. They
have also held positions in companies that were tangentially important to the toy industry like Burlington Coat Factory (carries toys); Brookstone (carried high tech toys) and Michaels (carries toys).
Over the course of my next two postings I am going to be taking a look at Bain through its performance at KB and Toys R Us so your insights are welcome. Bottom line, I want to look at what Bain's performancemay say about its strengths or weaknesses as a player in the toy industry.
If you worked for KB, were a vendor, a rep, an investor, an interested party or just plain interested, please let us know any insights you may have on two core question: Has Bain Capital been good for the toy industry? Has the toy industry been good for Bain Capital?
Sheyla commented:
Mine do. A friend droeppd off a bag of dog toys her dogs wouldn't play with. I was going to give them 1-2 toys and save the rest for later. I turned my back and the next thing I knew they had gotten into the bag and spread all the toys out around the room. The next day my sister came to visit and the dogs kept barking at her and following her around they were looking for more toys! Now they expect everybody who visits to bring them toys.
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TheTruth commented:
Unfortunately this was a typical Bain corporate raid. The FACTS are: they purchased the company, loaded it with staggering amounts of new debt, recouped a 320% return of 85 million dollars (plus an additional 35 million went to the KB execs they worked with) and then pushed it into bankruptcy. The full time and seasonal jobs lost were actually just above 10,000. Romney as a partner in Bain (SEC filings say still a manging partner, contrary to his claim) made millions from the transaction.
updatedfacts commented:
The author of this article has updated his facts as follows:
Bain owned KB at the time it filed its first bankruptcy in 2004. The company came out of bankruptcy when it was purchased in 2005 by Prentice Capital Management. It was under the ownership of the latter that the decision was made to liquidate the company in 2008. [Correction: In an earlier version of this article I stated that Bain Capital owned KB when it filed for bankruptcy in 2008. This was incorrect. Bain was the owner when KB filed for bankruptcy the first time, in 2004.]
Once again, the initial article appears to begin to villify Mitt Romney via Bain Capital and then the facts show otherwise. Bottom line is that when a business doesn't make a profit, it will eventually go away and yes, that does mean people lose jobs. Just a fact.
shelleynapier commented:
Interesting topic. Thanks..This article in the Boston Herald is about a former KB Toys employee. The article is from 2009. Titled "KB Toy Worker Blasts Bain for Exec's pay out. Discusses KB toys Creditors law suit against Bain Capital claiming the the recap plan caused the bankruptcy.
