Right Start Buys Zany Brainy Assets

Zany Brainy has been purchased by Right Start, a chain of specialized educational toy stores for infants and children up to age four. Under the terms of the agreement, Right Start will acquire all the assets of Zany Brainy, including $115 million in cash, inventory and accounts receivable, in exchange for $11.7 million cash, 1.1 million shares of Right Start stock and the assumption of $85 million in liabilities.

In addition to selling child development products, Right Start stocks child seats, strollers and related accessories. Books are sold as sidelines.

Zany Brainy filed for Chapter 11 bankruptcy protection on May 15 and was provided with a $115-million debtor-in-possession loan from Wells Fargo Retail Finance, which allowed the company to keep the stores running through the bankruptcy. Wells Fargo is providing another $115 million to Right Start to help fund the Zany purchase.

In June, Waterton Management, a Los Angeles investment company, offered $115 million for Zany Brainy. David Watson, v-p of media relations for Coffin Communications Group, which represents Right Start, told PW that Waterton had searched for a company that could manage Zany Brainy and decided that Right Start had the right combination of experience and expertise. Waterton helped broker the deal and has agreed to invest $20 million in Right Start in return for a 48% stake in the combined company.

Right Start was founded in 1985 and has headquarters in Westlake Village, Calif. The company has 68 stores in 16 states, with 23 in California and the remaining stores are spread across the Midwest, the East Coast and Texas. In 2000, the company lost $7.7 million on sales of $44.2 million. For the 13 weeks ended May 5, net sales fell 4%, to $12.7 million.

According to Watson, the company plans to retain the Zany Brainy brand name and to add Right Start boutiques in each of the 187 Zany Brainy stores.