Fairfax Financial in $300M bid for Toys 'R' Us Canadian operations

Ahead of an auction scheduled next week for the Canadian assets of Toys "R" Us, Fairfax Financial Holdings Ltd. has put in a $300-million offer meant to serve a floor for the bidding.

Auction of Toys 'R' Us Canadian operations to take place on April 23

The Canadian operations of Toys "R" Us are to be auctioned off on April 23 in New York City. Fairfax Financial has an agreement for a $300-million bid for the assets. (Eric Gay/Associated Press)

Ahead of an auction scheduled next week for the Canadian assets of Toys "R" US, Fairfax Financial Holdings Ltd. has put in a $300-million offer.

According to court documents filed April 19 with the the United States Bankruptcy Court for the eastern district of Virginia, Toys "R" Us plans to auction off the company's Canadian operations on April 23 at 11:00 a.m. ET at the offices of a law firm in New York City.

Fairfax's $300-million bid is a stalking horse offer, meaning it is designed to serve as a floor for the bidding at auction. Fairfax would gain control of the toy retailer's Canadian operations if a better offer doesn't emerge.

Toys R Us said it plans to seek approval for the sale of the Canadian assets on April 24 in bankruptcy court in Richmond, Va.

Earlier this week, a bid by Isaac Larian, the chief executive officer of California-based toy maker MGA Entertainment, to buy the Canadian stores of  Toys "R" U and some of its U.S. stores was rejected. Larian had offered  $675 million to buy the U.S stores and $215 million for the Canadian outlets.

Despite the rejection, Larian has hinted on Twitter that he may not be content to walk away.

"It ain't over till the fat lady sings," Larian tweeted on April 17. "Those who know me, know that I don't give up easily."

Saddled with debt and facing competition from firms such as Amazon, Toys "R" Us filed for bankruptcy protection in the United States in Sept. 2017. Its Canadian operations subsequently obtained creditor protection in Ontario.

The company unveiled plans in March to close or sell its 735 stores across the U.S., including its Babies "R" Us stores. 

The 82 Canadian Toys "R" Us outlets operate independently of the U.S. division.

A Toronto-based holding company run by Prem Watsa, its chairman and chief executive officer, Fairfax Financial is  involved in property and casualty insurance and reinsurance and investment management.

Fairfax also has a history of making buying stakes in distressed companies.

In February, Fairfax said it was acquiring the services business of Carillon Canada. The move came after Carillon Canada sought creditor protection after its parent company, British construction giant and state contractor Carillion PLC, entered liquidation after becoming unable to service its debt load.

In 2017, Fairfax acquired a stake in Performance Sports Group, the sports apparel company that owned Bauer and Easton. That came after Performance Sports filed for creditor protection in Canada and the U.S. in October 2016.

Fairfax's subordinate voting shares closed down seven cents at $671 on the Toronto Stock Exchange on Friday.