Mastermind Toys, the largest independent specialty toy and children’s book retailer in Canada, announced today that it has entered into an asset purchase agreement with Unity Acquisitions Inc., a company owned by Canadian retail pioneers Joe Mimran, Frank Rocchetti and David Lui.
Under the terms of the transaction, Unity will purchase the majority of Mastermind Toys store locations and see a significant portion of employees continuing with the business.
“Mastermind Toys is a beloved Canadian retailer with a loyal customer base driven by quality, curiosity and play,” said Joe Mimran. ”The acquisition aligns with Unity’s strategy to enhance and grow extraordinary Canadian brands. We are thrilled to have the opportunity to work with the team at Mastermind Toys and take the brand and the business to the next level.”
Mimran said he has been familiar with the brand for many years.
“I’ve always loved the positioning of the brand and the customer the brand catered to,” he said. “The one thing that really resonated with me was when we launched Rise Little Earthling which is a baby/toddler apparel brand, it was really about shaping future leaders and the line was all organic. 100 per cent organic. And we created these social warriors, characters, that were part of the graphic and positioning of the line. And when Mastermind became available unfortunately through the CCAA process we just thought that it was the perfect brand to look at in terms of resurrecting it and bringing it back to its original ideals of how children can grow and learn through play, ensuring that we make sure that there’s a real distinction between toys just being toys and toys that can really add value.
“We love great Canadian brands and wherever we think we can make an addition to the concept and really grow it and help it extend itself and rejuvenate itself, that’s the place we want to play.”
Mimran said 18 of the Mastermind stores will be closing and the new ownership will be assessing the balance of the rest.
“We will definitely be coming out of this with a very, very good number of locations across Canada,” he said. “The brand has a very good following, an ecomm following as well. So be on the lookout for changes and newness in that direction. Of course, none of these changes in the first two quarters. It will take a few quarters to really get the ball rolling and we’re very excited. We’ve got some great plans. We’ve already got a lot of good reach out from different individuals from across the country, who are interested in being part of the next phase of this great brand.”
The transaction is subject to certain closing conditions, including approval from the Ontario Superior Court of Justice (Commercial List) in the Mastermind’s ongoing proceedings under the Companies’ Creditors Arrangement Act. The transaction is expected to close in January 2024.
On November 30, Mastermind Toys obtained Court approval to conduct liquidation sales at 18 of its store locations. The liquidation sales commenced December 1 and continue through the holiday season. The liquidating stores are not part of the transaction with Unity and are not included in the extended holiday return policy.
Information related to the CCAA proceedings are available on the Monitor’s case website at www.alvarezandmarsal.com/Mastermind.
Mastermind Toys is also introducing an extended holiday return and exchange policy for purchases made online and in-stores, other than at the 18 stores conducting liquidation sales.
Mastermind Toys has been in business for 39 years and has 66 stores coast-to-coast.
Court documents state: “The Mastermind Entities are currently facing financial difficulties as a result of declining sales, gross margins, increased competition, commoditization of the toy category and other macro-economic trends facing many Canadian retailers. The Mastermind Entities’ financial difficulties were exacerbated by the COVID-19 pandemic, including as a result of store closures and an increase in shoppers making online purchases.
“Despite implementing cost reduction and other initiatives to improve profitability, Mastermind LP’s revenues and profitability have declined over the past several years. The Mastermind Entities do not have sufficient cash flow or liquidity to continue running its business and do not have sufficient funds to pay their liabilities as they become due.
“The Mastermind Entities are insolvent with liabilities well in excess of $5 million and unable to meet their obligations as they come due.”
“I think this acquisition could make sense for Unity and obviously offers a lifeboat for the Mastermind brand and many of the employees that work there. Depending on what Unity paid for Mastermind, assume a very low price, and renegotiated leases, Unity will face a significantly lower break-even point. The brand will shrink but will carve out a path to profitability,” said Bruce Winder, Retail Analyst & Author.
“The Mastermind brand is solid and they have a niche within the toy industry that could offer higher margins than mass merchants. They can save additional costs through shared services between their other banners too. Unity will need to weather the storm for Mastermind in this challenging economy until 2025 when things may pick up. It will be exciting to watch what Unity can do with not only Mastermind but Kit & Ace too.”
“It’s good to see that Mastermind Toys was spared oblivion. This is not an easy category to navigate. Having looked at acquiring an interest in a toy chain once. The category has been trying to redefine itself since 2014,” said George Minakakis, CEO, Inception Retail Group. “The competition from electronic and digital remains strong. The declining sales of traditional toys have been more socially driven by what kids see their friends with, and what parents want them to be happy with.
“The whole sector has had economic pressures, with many struggling with profits and revenue growth. On the other hand, it is about the store experience and what draws consumers to toy stores. Lately, it’s been kind of dull. The opportunity for Mastermind Toys lies with the right leadership having a vision of how this brand evolves, which has faded over the years. They will need to build greater resilience in their e-commerce model, a higher level of data and predictive analytics to understand what is changing before the market does. Mastermind Toys will need to reduce its dependence and risks on what others are doing, in effect stop chasing trends and start creating them for their long-term viability.”
Michael Kehoe, Broker of Record for Fairfield Commercial Real Estate in Calgary, said the acquisition of Mastermind Toys by Unity Acquisitions Inc. should facilitate a seamless handover with virtually no disruption to store operations or the retail footprint.
“The announcement provides a vote of confidence for the Canadian retail landscape at this critical time in the retail sales cycle. Unity acquisitions are the logical stewards of this brand in these turbulent times. The Mimran / Rocchetti / Lui powerhouse will bring a sense of stability over the near term as consumer angst and difficult economic conditions are expected to settle down. Mastermind Toys is a legacy Canadian brand, a category dominant retail player, and I will be happy to see it move forward to new heights with the proposed new leadership if the CCAA and court process stars align.”
Unity Acquisitions Inc., established in 2023, recently acquired Kit + Ace and Casca Footwear. In addition to Unity, Mimran and Rocchetti oversee the growth of Tilley Endurables Inc., transforming it from a venerable hat brand to a comprehensive apparel brand, available in Canada, the US, the UK, and Australia. In 2020, they introduced Rise Little Earthling, an organic line for babies and toddlers sold across Canada and the US.
Mimran is the founder of Joe Fresh, and has also recently collaborated with Staples Inc. to create Gry Mattr by Joe Mimran, a collection of thoughtfully designed office and travel pieces.
Lui is the CEO of Kit and Ace and has over 30 years of entrepreneurial and retail experience with global brands. He is known for his award-winning brand transformations and has a strong passion for scaling businesses.
Went to the Mastermind Toys in Vaughan on Friday to get some things for the family. Found that the 40% off discounts were few and far between and that the prices at this store were severely marked up compared to the offerings on their website: Pop Funkos were something like $17 at the store, and $8 on the site. So, I got them off the site instead.
New owners don’t expect existing gift cards! Disappointed!