Fung Group tipped to lead Toys ‘R’ Us takeover

Toys ‘R’ Us Asia may be taken over by to its local partner, the Fung Group.

A deal could give Toys ‘R’ Us Asia a valuation of at least US$1 billion, an inside source told Bloomberg. The private holding company of Hong Kong’s billionaire Fung brothers is considering finding partners to join it in the purchase, and if a deal is reached the group may seek an IPO after one to two years, according to the source.

The US company and some of its North American subsidiaries filed for bankruptcy in September, the Asian unit being excluded. Growth in Asia Pacific helped offset weak sales in the US and Europe in the quarter ended October 28, reports Deal Street Asia. The company combined its Japanese business with the broader Asia venture last year, which now has more than 400 outlets throughout the region.

Representatives for Toys ‘R’ Us and Fung Group have declined to comment on the possibility of the Asia business being offloaded.

Separately, the UK arm of Toys ‘R’ Us is likely to start a court-led administration process this week after failing to secure new financing to meet a tax liability due this month. The business faces a £15 million ($21 million) value-added tax bill, and talks with potential buyers have fallen through in the past few weeks.

Toys ‘R’Us Asia was set up in 1986. Fung Group is also the biggest shareholder in Li & Fung, a supplier to Wal-Mart Stores and other US retailers. KKR, Bain Capital and Vornado acquired New Jersey-based Toys ‘R’ Us in a $7.5 billion leveraged buyout in 2005. The company has more than 1600 stores and nearly 65,000 employees worldwide.

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