Toys ‘R’ Us, Inc. is a private company thanks to a 2005 leveraged buyout by KKR & Co. LP (KKR), Bain Capital and Vornado Realty Trust. On February 7, 2018, the toy store started liquidation sales at 144 stores in the US after for filing for Chapter 11 bankruptcy in September 2017. That filing was accepted a day before the company made the decision to end around 20% of its stores. On March 9, 2018, it is reported that the company is preparing for liquidation of all of its U.S. stores due to its failure to find a buyer or reach restructuring deals with lenders. 

Leveraged Buyout in 2005

Toys R' Us went public in 1978, and was a publicly traded company for about a quarter of a century, holding a death grip on the coveted toys market until its market share began eroding from companies like Walmart (WMT) and Target (TGT). 

Back in 2005, the trio mentioned above won a bidding war with other private equity companies such as Cerberus Capital. KKR & Co. LP, Bain Capital and Vornado Realty Trust combined for a $6.6 billion leveraged buyout, or an acquisition of a company using a significant amount of debt. Shares were bought for $26.74 each, marking a multiyear high at the time. Shares were bought out for much lower than their all-time high near $45 back in 1993.

Geoffrey's Last Stand

In 2015, Toys ‘R’ Us hired David Brandon to be its new chief executive officer (CEO). Brandon comes to the large toy retailer after a stint as the athletic director of the University of Michigan. Brandon has a history of taking companies public, and many believed the hire was a sign of a future IPO (It wasn't). Brandon spent more than 11 years at Domino’s Pizza, a company he successfully took public. Brandon also took Valassis Communications public before he worked for Domino’s. The company also began a rebranding effort centered around their mascot Geoffrey the Giraffe, redesigning him to be more "kid friendly" 

At its peak, Toys ‘R’ Us was the leading toy retailer in the U.S. Competition from big box retailers such as Walmart and Target have continued to cut into its market share, and the continued presence of online shopping from the likes of have significantly hurt the toy store's sales. 

The other big negative for Toys ‘R’ Us is its high level of debt. The leveraged buyout left the toy retailer with a significant amount of debt, and the pay day is coming up. Most obligations was pushed to 2017, and rumors of restructuring and bankruptcy began to fly. 

The company then hired a restructuring law firm, according to the Wall Street Journal, and soon after filed for bankruptcy. The company reported a net loss of $950 million for the calender year 2017 up to October 28, 2017, and then announced a wave of closings. It remains to be seen if the company can come out on the other side of Chapter 11 as a success story, or if Amazon (AMZN) has eaten their (toy) lunch once and for all. 

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.