Gladstone Investment Corp has acquired the majority stake in McFarlane Toys, it was announced Friday. Co-owners Todd McFarlane and Stephen Tetrault will remain involved in the company as shareholders and executives, according to the press release. Terms were not announced; Gladstone used debt and equity financing to fund the sale.
Although a privately owned company being sold to investors usually looks bleak, Gladstone is not quite a private equity company; rather it is a publicly traded business development company which focuses on “on acquiring mature, lower middle market companies,” with investments topping out at $75 million, according to one deal sheet. They previously invested in Funko, selling off their stake after two years and making a profit along the way. They currently own toy company Schylling and Brunswick bowling supplies, among their consumer-facing holdings. Other holdings include manufaction and defense companies.
With collectibles riding high, a stake in a well established toy company right now might seem like a smart move for investors. According to the pr the plan is to “support McFarlane Toys’ continued product innovation, expansion into new collectible categories, development of strategic licensing partnerships, and growth across domestic and international markets.”
McFarlane Toys launched in 1994 as “Todd Toys” and quickly revolutionized the toy industry with its highly detailed figures, including the Spawn line, but soon branching out to movies, video games and sports figures. The company has remained popular for more than 30 years and currently has licenses for both Marvel and DC, and video games such as Diablo and Fallout, as well as baseball, football, and MMA figures. My McFarlane figure of Aaron Rodgers as a Jet – a priceless memento – is sitting near me as I type this.
McFarlane himself has remained as an entertaining and very much involved founder since then. An entire book could probably be written about his various business ventures but suffice to say he has quite a lengthy Wikipedia page, including lawsuits, movie studios, and much more. Perhaps now he will have time to make that second Spawn movie.
Tetrault is a Canadian entrepreneur who became co-owner of McFarlane Toys in 2018, and acquired Game Stop Canada last year, the most recent of many toy and collectible based investments over the years.
Comic Tropes offered an analysis of the deal on Twitter, I can’t vouch for it but it is interesting reading, including a warning to unsophisticated investors.
The principles all released optimistic statements:
Todd McFarlane, Founder and Toddfather: When I started McFarlane Toys, the goal was to give fans and collectors products with a level of detail and creativity that stood apart. That commitment remains at the heart of our business. We are excited to partner with Gladstone Investment and the new opportunities this partnership will create, as we continue developing new products, supporting our licensing partners, and delivering the quality and creativity our fans expect.”
Stephen Tetrault, CEO and co-owner: We have built a strong foundation of talented people, valued licensing partnerships and longstanding retail relationships. Our partnership with Gladstone represents an exciting opportunity to accelerate our growth, expand our global reach, and continue diversifying our product portfolio. With Todd’s creative vision, our talented team, and Gladstone’s experience and resources, we are exceptionally well positioned for the next chapter of McFarlane Toys.”
Michael Cueter, Managing Director at Gladstone Investment: McFarlane Toys has established a differentiated collectibles business through its well-recognized brand, distinctive design capabilities and deep relationships with leading licensors and retailers. We believe the company’s passionate collector following, experienced team, and ability to bring new properties and product formats to market creates a compelling foundation for continued growth. We are excited to partner with Todd, Stephan, and the broader McFarlane Toys team as they build on the company’s legacy and pursue the next phase of growth.”
Erika Highland, President of Gladstone Investment: McFarlane Toys represents another strong example of Gladstone Investment’s strategy of partnering with successful founder- and management-owned lower middle market businesses. This investment represents our dedication to our ultimate goal of investing in quality companies that will produce stable income for dividends to our shareholders, as well as longer-term capital appreciation, through our significant equity ownership, resulting in capital gains.
