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Zany Brainy to Buy Noodle Kidoodle for $40 Million
John Mutter -- 5/1/00
Shakeout in children's multimedia retail continues

The shakeout among multimedia children's retailers that started late last year with the demise of Learningsmith (News, Dec. 13, 1999) continued last week, with the announcement that Zany Brainy will purchase Noodle Kidoodle for some $40 million. Under terms of the merger agreement, Zany Brainy will offer 1.233 shares of its stock for every share of Noodle Kidoodle. The new company will be headquartered in Zany Brainy's main offices in King of Prussia, Pa., and all stores will be called Zany Brainy. Zany Brainy CEO Keith C. Spurgeon will head the new company, while Stanley Greenbaum, CEO of Noodle Kidoodle, will become a director.

The new Zany Brainy will have 163 stores (104 Zany Brainy outlets and 59 Noodle Kidoodles, which will be rebranded by the fourth quarter) and should expand to more than 190 by the end of the year. Total revenues for the two companies in the fiscal year ended January 31, 2000, was about $376 million, with Zany Brainy posting revenues of $241 million, and Noodle Kidoodle sales of $135 million. Both companies were marginally profitable in fiscal 2000, and the economies of scale resulting from the merger should boost the combined company's bottom line.

Spurgeon called the merger "a natural fit," noting that Zany Brainy would benefit in particular from the addition of Noodle Kidoodle stores in "large markets like New York, Texas, Florida and Michigan." While both companies sell a mix of toys, games, books, videos and other products, Zany Brainy, which stocks 7,000-10,000 book titles in each store, has emphasized books more than Noodle Kidoodle. The new company will remain "committed to books" and "books are an important part of the brand," Robert A. Helpert, Zany Brainy's chief financial officer, told PW.

The new Zany Brainy intends to keep using the Zany Brainy warehouse in Swedesboro, N.J., and the Noodle Kidoodle warehouses in Phillipsburg, N.J., and Nashville, Tenn. Helpert said that few Zany Brainy and Noodle Kidoodle outlets are located near enough to another to warrant closing one of them.

Both companies noted that they expect to post losses in the first quarter greater than those in the first quarter of 1999, in large part because of the drastic decline in sales of Beanie Babies. At Zany Brainy, sales of Beanie Babies and Crazy Bones accounted for 18% of company sales in the first quarter of 1999 ,but only 2% in February and March of this year.

Zany Brainy was founded in 1991 by David Schlessinger. Its first stores were in the mid-Atlantic region, and its stores are now in26 states. The company went public last year.

Noodle Kidoodle was founded in the early 1930s as Greenman Bros., which distributed toys, housewares, stationery and some general products. The company opened its first Noodle Kidoodle store in November 1993. It went public in 1996.

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