Toys R Us Canada Gets Last-Minute Lifeline

(RTTNews) - Canadian investment firm Fairfax Financial Holdings Ltd. (FRFHF, FFH.TO) has submitted a "stalking horse" bid worth C$300 million, or $237 million, for the Canadian unit of Toys "R" Us, according to court documents.

A stalking horse bid is an initial bid on the assets of a bankrupt company. The bankrupt company will choose an entity from a pool of bidders who will make the first bid on the company's remaining assets.

The stalking horse bid sets the low-end bidding bar so that other bidders cannot underbid the purchase price. It also enables other potential buyers to submit competing proposals.

Fairfax, the investment firm run by billionaire Prem Watsa, will acquire the 82-store Canadian division of Toys "R" Us if it is not outbid at an auction scheduled for Monday. Fairfax will receive a break fee of about 3 percent if another bidder is chosen.

Earlier this week, Toys "R" Us reportedly rejected an offer from billionaire Isaac Larian, the CEO of toymaker MGA Entertainment that owns Little Tikes and Bratz dolls. Larian offered $675 million to buy the U.S stores as well as $215 million to buy the Toys "R" Us stores in Canada.

Toys "R" Us filed for bankruptcy in September 2017. The company announced in March this year that it would close all of its U.S. stores and sell its Canadian, Asian and central European divisions.