Consortium Buys Toys R Us

Toys R Us Inc., the nation's second-largest toy seller, had agreed to be acquired for about $5.75 billion by an investment group that includes two private equity firms and a real estate developer, the company announced Thursday.

The parties in the consortium are Bain Capital LLC and Kohlberg Kravis Roberts & Co., and Vornado Realty Trust. All three companies will be equal partners in the acquisition.

The surprise sale Wednesday night ended a seven-month-long auction that had been expected to end in the sale of only the company's toy division. The Wayne, N.J.-based retailer had been expected to continue operating its more lucrative Babies R Us stores, but the two divisions were too closely associated to make a split feasible.

The Wall Street Journal reported the consortium would likely sell some of the chain's stores to other retailers, but would continue operating those that remain under the Toys R Us and Babies R Us names.

The retailer's toy business has been hurt by price cutting from the discount chains such as Wal-Mart Stores Inc., the nation's biggest toy seller.

Although Toys R Us has 685 toy stores in the United States and 603 overseas, the 216 Babies R Us have been an increasing factor in profitability.

In the fiscal year ended Jan. 31, 2004, Babies R Us, which sells baby furniture, clothes and accessories, accounted for three-quarters of the company's operating income, despite logging just 15 percent of the company's $11.6 billion in sales.