New owner set to bankroll expansion of Child World - toy retailer

Discount Store News, August 20, 1990 by Laura Liebeck

New Owner Set to Bankroll Expansion of Child World

AVON, Mass. - The new owners of the Child World toy chain will pour much needed cash into the stores, enhance existing operations and expand the chain.

"Child World is going to be a priority for us," said Stanley Gold, president and general partner of Trefoil Capital Investors L.P., Burbank, Calif., a $450 million investment fund. "We plan to make sure that it has the resources necessary to achieve its potential."

Trefoil and Child World's parent company, CNC Holdings of Cleveland, were expected to sign a definitive agreement on the transaction by presstime. The sale agreement calls for Trefoil to acquire CNC's 82 percent equity in Child World in a non-cash transaction. The remaining 18 percent of the company, or about 2 million public shares, will be purchased by Trefoil for $14 per share, or $28 million, in a separate transaction.

The agreement is subject to unanimous approval of Child World's board of directors and its bankers. The sale should be completed in October.

Trefoil will be new to the toy business but not to retailing. Formed recently from executives of Shamrock Holdings, an investment company, Trefoil's owners operate the 71-unit Music Plus chain in Southern California, and the 140-unit Dallas-based Sound Warehouse Plus retail chain.

CNC indicated last March that it was interested in selling Child World and in May retained Donaldson, Lufkin & Jenrette Securities Corp., SG Warburg & Co. and The Argosy Group to help it find a buyer for the ailing toy chain. CNC purchased Child World in 1981.

Child World had a tough 1989. The No. 2 toy retailer behind Toys "R" Us reported income plummeted to $5.8 million on sales of nearly $830.3 million. Earnings in 1988 totaled $12.6 million on sales of $807 million. Last year, comparable store sales also declined by 8.6 percent.

The non-cash transaction for CNC Holding's 82 percent equity in Child World indicates CNC's desire to relieve itself of debt. This acquisition calls for Trefoil to give CNC a note for Child World's assets. CNC will then use the note to pay off some of its debt, explained Steve Stern, a spokesman for Trefoil.

Exactly why Trefoil is interested in Child World is unclear. Trefoil would not comment on specifics beyond a few brief statements.

Gold said Child World "fits several criteria" Trefoil was looking for in an acquisition: "It's in an industry in which we have a great deal of experience, retailing. It has significant potential, a solid employee base and tremendous opportunity for growth."

Gold noted that his goal is to make Child World the consumer's first choice in toy retailers.

That's a lofty goal considering Child World trails Toys "R" Us by a significant margin.

TRU posted $4.3 billion in toy sales last year, an 18.3 percent gain over 1988. Profits were up, too. Operating profit surged 18.1 percent to $493.7 million.

Current plans to bolster Child World's competitive position center on rolling out more stores with the company's new prototype, unveiled last Christmas in Framingham, Mass., installing scanning in all stores, expanding juvenile apparel, and improved marketing and merchandising programs.