At The Age of 75 Zapf Creation Pursues “The American Dream”

Brandora Staff - September, 19th 2007

BaFin Paves The Way For New Financing Concept

World-leading Manufacturer of Function Dolls

The German Federal Financial Supervisory Authority (BaFin) has exempted MGA Entertainment, Inc. (i.e. their shareholders represented by Isaac Larian, CEO MGA) from submitting a mandatory offer in case they gain control of Zapf Creation. Based on this new situation, it is now possible for MGA Entertainment, Inc. or its shareholders to exceed the voting rights threshold of 30% (today they have app. 24.5%) without having to submit a takeover offer. The exemption may be revoked if certain restructuring goals are not reached or reached in time.

75th Birthday in Rödental

The world-famous doll manufacturing company Zapf was founded 1932 by Max and Rosa Zapf in Rödental/Coburg (Germany). After WW II the next Zapf generation, Brigitte and Willi Zapf, took over management and successfully extended their business into European markets.

Baby born®

But Zapf did not only internationalize their distribution and marketing; 1980 they also started to acquire and build production sites abroad – first in Europe and later in Asia. 1991 Zapf launched their first Baby born® function doll onto the markets. Baby born® soon created a real hype and became best-selling traditional toy in Germany between 1997 and 1998.

1992 Brigitte and Willi Zapf sold their company to a Triumph-Adler Division, the TA Spiel- und Freizeit-Holding GmbH. On 26th April 1999 the Zapf Creation AG was successfully introduced on the German stock exchange. In 2001 also Baby born® sister Baby Annabell® became a bestseller in the UK and enjoyed high popularity in other European countries. But this meteoric rise came to a sudden end in 2003.

Baby Annabell®

Due to the great pressure to succeed after their IPO, Zapf mainly concentrated on their already well-established function doll business and lost sight of further innovation and development. Unfortunately – but just as many experts had anticipated before – consumers demand for this “outdated products” soon became dwindling. Without any all-new alternative Zapf’s market value started consequently dropped. Major changes in management and mass layoffs followed: Today Zapf employs less than 300 people world-wide.

MGA came, MGA saw, MGA …

Today’s major shareholder MGA entered the scene in 2006. The US manufacturer of the branded “Bratz” fashion dolls started – first secretly, then openly – to buy into Zapf Creation. Bandai, MGA’s Japanese rival, had also shown serious interest in the German doll manufacturer. But although the management board supported the public takeover offer, the Japanese were soon driven from the field. As to the question why MGA became involved, we can only guess. What we know for certain is that MGA had never before been able to gain a foothold on the German market. Maybe they now follow a new strategy with a new partner.

Right from the beginning, new major shareholder MGA took over control. MGA employees infiltrated the supervisory board and appointed a new management. Restructuring expert Georg Kellinghusen was shortly after replaced by Thomas Pfau, managing director of MGA Germany. Until the appointment of Jens Ulrich Keil in January 2007, Pfau even acted as sole director of Zapf Creation. Today almost no one of the old management still works for the company, although many of them had done a good job in hard times and all of them know the complex German market by heart – which indeed is really different from the toy market in the USA. Former Zapf leaders are now to be found in executive positions at other “key players” in toy business, including Hasbro, Simba and Märklin.

None the less, on occasion of their 75th anniversary, all of us – not only Zapf Creation shareholders – wish all the best to the American Zapf Creation AG with their “Made in China” toys on the German market. It would be a pity, if this German success story should have no future.