Bonjour Saint-Claude!

Simba Dickie Group and Smoby Group

In March Simba Dickie acquired the lion´s share in the Smoby Group, formerly France´s number one toy manufacturer. The takeover saved important jobs in Lavans-lès-Saint-Claude and represented an investment in European industry.

Negotiations got off to a slow start, dragged on, and then suddenly it all went with a bang. In the morning of 3 March the Jura Commercial Court declared the Fürth-based Simba Dickie Group the new owner of a large share in the Smoby Group toy manufacturer.

Telephone wires were red hot. In a matter of seconds e-mails were flooding into mailboxes at the Fürth headquarters. COO Uwe Weiler paused only to grab his BlackBerry, cell phone, and briefcase before dashing from his office to the airport. No time for a clean shirt or any travel essentials: just get to Geneva and from there to the Smoby headquarters in Lavans-lès-Saint-Claude. His mission: talk. What was happening?

Sometime big player in crisis

Smoby was founded in 1924 as a French family firm. The absorption of Majorette and Berchet turned the Smoby Majorette Group into the French toy market leader. Over the years it had 18 subsidiaries worldwide, eventually employing 2,300 people, 1,080 of them in France. The heart of the firm was its headquarters in the Haut Jura regional nature park, which includes parts of three departments (Jura, Doubs, and Ain)

Then a year ago Smoby went into the red. A number of firms had been acquired, but not fully integrated. The product range was unclear and a number of segments were cannibalizing one another. In fact, things were going downhill.

Employees, not knowing how things would develop – if at all – were afraid for their jobs and their future. And with good reason, because Smoby had always been one of the region´s biggest employers.

The Haut-Jura is a region of contrasts: pinewoods, rivers, vineyards and mountains up to 5,000 feet, idyllic mountain pastures and stony memorials of a past stretching back before the Roman conquest of around 50 BC.

Waterfalls, chasms and lakes make this a landscape of wild romantic charm. By the river Beinne, in the province of Franche-Comté, is the commune of Lavanslès-Saint-Claude, site of Smoby´s administrative head-quarters. Other factory sites are Arinthod and Moirans. Toys are exported from there all over the world.

Cheese and toys and not much else

The mainstays of the Haut Jura were always agriculture and forestry, together with some handicrafts such as penny whistle making. French penny whistles nowadays come almost exclusively from Saint-Claude.

The climate is too cool for vines – they are found only in the western Jura – but suited to dairying and in particular, cheesemaking. About 80% of milk production is now turned into cheese. Fondue and raclette were invented here (and not in Switzerland as is commonly believed). The best-known cheese is Comté, made from the unpasteurised milk of the redand-white Montbéliard cow. The region is also known for its game and its delicious morel mushrooms.

A few other industries developed in the nineteenth century, including button and buckle making, diamond cutting and clock- making, and most importantly of all, plastics and, of course, toys.

A friend in need

In March 2007 Smoby, with debts of over 270 million euros, took steps to protect its creditors; in October 2007, insolvent, it went into administration. The commercial court in Lons-le-Saunier commenced composition proceedings (redressement judiciaire). Ten competitors worldwide signified an interest, most of them from the USA. "We wanted to stop that," says Simba Dickie Group chairman Michael Sieber. "If a big American group had got its hands on the firm, Smoby would have been lost to Europe."

The French agreed. The process culminated in a race to the finish against a French investment syndicate, which naturally benefited from being the home team. But the administrators opted for the Simba Dickie Group as strategic investors for parts of the former Smoby-Berchet-Group. Decades of international experience in the toy trade along with stable, global distribution networks and twenty subsidiaries convinced the government administrators in the Lonsle-Saunier commercial court that Simba Dickie was the right choice.

"In previous years we have shown again and again that we are good at restructuring after a takeover," says COO Uwe Weiler. The Fürth-based Group includes such wellknown brands as Simba, Dickie, Schuco (model cars), BIG, Nicotoy (soft toys), Noris, Tamiya (model building kits) and Eichhorn (wooden toys; see also page 28). Branded toys are developed on the relevant firm´s premises and marketed worldwide. The Group is also strong in selling license topics such as Walt-Disneyarticles.

A milestone in corporate history

The takeover marked a milestone in the twenty-five-year history of the Fürth group. It also meant a lot of work. First, the three managers from Fürth spoke to every employee individually. Yes, every single one, from trainees to managers. The agreement required the Simba Dickie Group to safeguard the jobs of 401 employees, but in fact they are currently employing 446. These people really are deeply thankful.

"Now our number one priority is to pass on our philosophy and attitudes, to motivate people and to put Smoby back on the road to success as soon as possible,"says CFO Manfred Duschl, looking to the immediate future.

The merger fits comfortably with the Group´s expansion and growth strategy. Smoby is a notable addition to the portfolio of this successful, middle-sized family business (turnover in 2007: 370 million euros). Before, it didn´t have big outdoor products like Smoby´s slides and playhouses, tricycles, toy kitchens and workbenches, with a quality and design unmatched anywhere in the world. "In a global, but still comparatively small industry like toys, it´s becoming ever more important to offer a comprehensive product range," explains Uwe Weiler.

The future is "Made in Europe"

The two firms also agreed new marketing processes in the Mediterranean area, though integration will take a couple of years. But investing in Europe is really important. For one thing, the logistics of producing Smoby toys in the Far East would be unworkable – simply too expensive.

For another, production in China is likely to become steadily less attractive. The change has already begun. "Wage costs are going to explode," says Weiler with conviction. And the times when foreign manufacturers were lured to Hong Kong with export subsidies are long over. Moreover, higher living standards and purchasing power in China itself, not to mention India and Russia, are creating a wholly new market: a market which values the guarantee of quality that "Made in Europe" confers on a toy.