Toy giant Mattel Inc. will add a lot of offshore plastics sourcing as a result of its planned acquisition of Tyco Toys Inc. of Mount Laurel, N.J. Tyco's only U.S. manufacturing plant is in Beaverton, Ore., where it makes its View-Master product line. Mattel also sources many of its toys offshore but it does injection, blow and rotational molding at its plants in Murray, Ky.; Medina, N.Y.; Ontario, Calif.; Augusta, Ga.; Fort Wayne, Ind.; and at three plants in Mexico. Neither firm relies much on U.S. custom molders.
John Amerman, Mattel's chairman and chief executive officer, said in a Nov. 18 news release that a combined Mattel and Tyco will ``provide synergies resulting from integration of the two companies' manufacturing and international distribution networks that will provide significant cost savings.'' Officials at the two firms were unavailable to explain the manufacturing synergies.
Tyco officials have said in the past that, along with the benefit of cheap production, the company's dependence on Far East manufacturing carries some risk.
Tyco said in its 1995 annual report that it ``could be adversely affected by political or economic disruptions affecting businesses in or trade with such countries.'' It noted, for example, that big duties could be placed on imports if Congress interferes with China's status as a most- favored nation in U.S. trade.
An October 1995 report by William Blair & Co. of Chicago estimated imports from China accounted for more than 40 percent of total U.S. toy volume.
Tyco did not mention Hong Kong's reversion to Chinese control next summer, but that event also clouds future Far East trade patterns.
Tyco (Hong Kong) Ltd. negotiates with Far East plants to make various Tyco products that are shipped around the world. One Far East company, Taiyo Kogyo Co., 18.5 percent owned by Tyco, makes all of Tyco's radio control toys.
Other joint ventures in Thailand and China make most of Tyco's Matchbox toys. Subcon-tractors in Singapore, Malaysia, Taiwan, Thailand and Indonesia also are involved in Tyco production.
Tyco, the third-largest U.S. toy producer, argued that it eventually could find ``adequate alternative sources'' for its foreign-made toys, but admitted a Far East supply interruption would disrupt its operations seriously and have significant adverse financial impact.
Mattel's offshore production includes plants in China, Malaysia, Indonesia, United Kingdom and Italy. The Wall Street Journal reported this summer that Mattel also planned a new doll-making plant at an unspecified location in 1997.
Mattel of El Segundo, Calif., agreed to pay about $755 million in stock for Tyco and expects to complete the deal in the first half of 1997. The offer was a 78 percent premium over Tyco's previous stock price.
Mattel and Tyco signed their mid-November agreement about nine months after Mattel was rebuffed in a bid to buy Hasbro Inc., its major competitor and the second-largest U.S. toy producer. Hasbro cited antitrust complications as the main reason it turned down the offer.
A Mattel/Tyco combination is less likely to spur antitrust actions. Mattel has about 18-20 percent of the U.S. toy market, while Tyco's share is about 5 percent, according to research analyst Jill Krutick of Smith Barney of New York. The firms' 1995 sales were $3.6 billion and $709 million, respectively.
The purchase will boost Mattel's lineup in the ``boy toys'' category and improve Tyco's access to international markets. It also will boost Mattel's offerings in games, dolls, preschool and activity toys.
The companies did not say whether the deal will affect a 2-month-old agreement Tyco made to distribute Empire of Carolina Inc. toys.
Tyco agreed to distribute Buddy L and other popular toys made in the Far East for Delray Beach, Fla.-based Empire.