Johnny Lightning Sold!!!!!!!!

Saw this first on Swifty's today, and a Google search confirms that Japanese toy manufacturer Tomy has purchased RC2, parent company of Johnny Lightning, for a whopping $640 million. Remember, in 2004 Tom Lowe sold Playing Mantis alone - then the parent company of JL - for $17 million. That ought to show you what a small slice of the RC2 pie Johnny Lightning really was! 

Tomy is leveraging this with $600 million in loans from a syndication; never a good sign. The more hands in a business, the more under-performing lines are likely to be quickly chopped to maximize profits. Sometimes sold, sometimes closed if no other buyer can be found. So Johnny Lightning needs to move some cars!

Why did Tomy do the deal? Reports say that the Japanese youth market shrank by 13% last year alone; fewer kids means fewer customers, which means lower sales. Coupled with a comparatively stronger yen, which increases purchasing power, Tomy pulled the trigger on this all-cash deal in order to export their domestic brands to other markets, in this case via RC2's existing distribution lines. Tomy, owners of the Transformer and Pokeman brands, also owns Tomika diecast cars, and its own toy train line called "Plarail". From Bloomberg Business comes a quote from Tomy President Kantaro Tomiyama  “This merger further enables Tomy to move towards our goal of increasing our global profile adding significant additional business in North America and Europe”. From all reports, Tomy  also wanted the coveted Thomas the Tank franchise, for its value in both the Japanese, and world markets.

So what does this bode for Johnny Lightning and its collectors? Will the line disappear, or become more muddied than it did under RC2 with old Racing Champions castings? Will we see Tomica castings in Forever 64 Release 17?

Probably not much will change.

Many of these product lines are already made in some of the same factories in China, with entirely different market segments that coexist but really don't "cross-segment"; so streamlining production and marketing costs by cutting or merging lines (or "brands") isn't very beneficial. While some blurring of lines may occur, in general there are "Thomas" people and there are "Plarail" people; Johnny Lightning people and Tomica people. Neither line interchanges well with its new siblings. People who collect Thomas will still collect Thomas, and people who collect Tomica will do the same.

The upside here is that Tomy can now export their domestic lines such as Tomica and Plarail" to new markets such as the U.S. and Europe, through established distribution channels, to customers who may be bored with the currently available offerings and take to these "fresh" new products, spiking sales of those lines. Concurrently, Tomy can start selling RC2 lines to a similarly bored Japanese market, spiking sales of those lines as well.

I don't see wholesale changes of any lines, to be honest. At some point, one of each line may be cut or sold if sales are significantly off compared to the other (i.e. JL under performs, so Tomica stays), but overall the purchase is for two things; streamline production costs if possible, and get the highest levels of sales/profit in order to pay off or exceed the $600 million leverage costs. Tomica and Johnny Lightning could be united under a single brand (not likely) yet retain their individual lines unique to each one's market, but more likely this is about selling Japanese products here and in Europe, and selling RC2 product - especially Thomas - in Japan.

I see JL as pretty much staying the same, with perhaps an export market added to Japan and other Tomica distribution areas. I'd say Tom Z and the folks are safe at Johnny Lightning, only because the Japanese have no concept of the American car market. How does a Japanese designer manage a line of American musclecars? Conversely, we may now start seeing much more presence in the U.S. market for Tomica, through existing RC2 distribution (and we all know how well that's working, right?!!!)

Both Japanese and American financial forecasters see this as a good thing for both companies, and I see this as a good thing for diecast lovers. Tomy has just ensured us that the JL line will survive for at least the near future, so it can be exported to new markets that may well jump on a "new" product - at least until sales fail to meet needed projections. And we diecast lovers may finally find another line to explore - Tomica - as long as we're willing to look at non U.S. cars in that line.

Relax, JL fans, it's all good. It's pretty much the same situation Budweiser found itself in when it was sold to InBev a couple of years ago.

Can we get an opinion from David Bilodeau, please?