Ex-TRUers eye Child World - former Toys R Us Inc. executives

Discount Store News, March 4, 1991 by Laura Liebeck

Ex-TRUers Eye Child World

CLEVELAND -- An investment group that includes two former Toys "R" Us executives expects to purchase the 182-unit Child World toy chain by mid-April.

CNC Holdings, Child World's parent, signed a letter of intent with WC Acquisition Corp. Feb. 20 for its 82% equity in the toy chain in a non-cash transaction. The agreement also calls for a payment of $2 per share, or $24 million, for Child World's 2 million shares of publicly traded stock.

Leading the acquisition for WC Acquisition are W. John Devine and Ronald E. Tuchman, both formerly of TRU.

Devine is credited with expanding the TRU franchise in California in the late 1960s and early 1970s and for spearheading the chain's expansion into foreign markets beginning in 1982. According to the purchase proposal, Devine was instrumental in designing the overall corporate structure of Toys "R" Us, including systems relating to store merchandising and operations, distribution and warehousing, buying, advertising and MIS. Having spent 17 years with TRU, Devine retired as an officer and director of the chain in 1983.

Tuchman, currently an executive officer of the Toy & Sports Warehouse chain of five stores, spent 24 years with TRU, lastly as senior vice president/director of purchasing and an officer of the corporation. He was in charge of negotiating buying programs with vendors, all buying, merchandising, planning, open-to-buy projections, purchase order flow, return goods and imports.

In addition, Tuchman, with other executives, developed the purchasing system and theories that are currently being used at TRU. And he was personally responsible for bringing video games and computers into the toy business in the early 1980s, according to his biography in the purchase proposal.

"I am pleased to be dealing with a company having the management strengths and toy industry experience to build on the Child World franchise," said Jeffrey A. Cole, chief executive officer of CNC Holding. "John Devine and Ronald Tuchman have over 50 years of combined experience in the free-standing retail toy business."

Prior to acquiring Child World, Devine and Tuchman will begin providing management services to the ailing toy chain. No specific details were released.

Devine and Tuchman, through the newly formed WC Acquisition, beat out a number of other bidders for Child World including Lionel, operator of the Kiddie City toy chain, and a partnership consisting of Malcolm Sherman, formerly of Zayre and Channel Home Centers, and Art Spear, former chairman of Mattel.

Cole said the reason he chose WC Acquisition over other bidders was because its proposal "offered the most to our various constituencies, and we believe they will have the financing and trade support necessary to close the transaction."

Mercury Financial Group, Ltd. and Mabon, Nugent & Co. are serving as financial advisors to WC Acquisition.

"This is a rare opportunity to acquire a valuable national franchise," said Devine. "The bricks and mortar, name recognition and human resources are all in place to remake Child World into a strong and formidable competitor in the retail toy industry."

WC Acquisition is the second group to advance a purchase offer for Child World in the last year.

Two-Step Acquisition

Last spring, Trefoil Capital Investors, a unit of Shamrock Holdings, proposed a two-step acquisition of Child World that included a non-cash transaction for CNC's 82% equity plus $14 per share for the 2 million outstanding shares in a deal worth $175.5 million. The sale fell through in November.

As a result, Child World's stock fell rapidly, trading below $2 per share, casting a pall over the chain's future. Since then, a number of dramatic events have affected Child World, including:

* payments to trade creditors were stopped Dec. 4; * a huge price-cutting campaign during Christmas was undertaken to cut inventory levels and overhead, as well as build cash; * missing its Jan. 15 deadline to resume normal trade terms with vendors; * company president Peter Hayes announced his resignation in January; * payments to trade vendors with aggregate past-due balances of $100,000 or less began in early February.