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Filed by Zany Brainy, Inc.
Pursuant to Rule 425 under the
Securities Act of 1933 and
deemed filed pursuant to
Rule 14a-12 of the Securities
Exchange Act of 1934
Commission File No.: 000-26185
Subject Company: Noodle Kidoodle, Inc.
THE FOLLOWING IS A PRESS RELEASE DISSEMINATED
BY ZANY BRAINY, INC. ON APRIL 24, 2000:
NOODLE KIDOODLE TO MERGE WITH ZANY BRAINY
Zany Brainy to Add 59 Stores and Over $130 Million in Revenues
KING OF PRUSSIA, PA - April 24, 2000 - Zany Brainy, Inc. (NASDAQ: ZANY), a
leading specialty retailer of high quality toys, games, books and multimedia
products, and Noodle Kidoodle, Inc. (NASDAQ: NKID), another retailer of
children's specialty toys, today announced that they have entered into a
definitive merger agreement.
The merger is expected to be accounted for as a pooling of interests and
will call for 1.233 Zany Brainy shares to be exchanged for every 1 Noodle
Kidoodle share. The deal is expected to be completed by the end of the second
quarter and is subject to shareholder and regulatory approval.
For the fiscal year ended January 29, 2000, Zany Brainy reported $241
million in revenues and Noodle Kidoodle reported $135 million in revenues. As a
result of the merger, Zany Brainy will have a store base of 163 stores. Given
the new store opening plans for Zany Brainy and Noodle Kidoodle, the combined
store count is expected to expand to over 190 stores by calendar year's end.
Excluding costs related to the merger, the merger is expected to be accretive to
Zany Brainy's earnings.
Companies Have Similar Mission
Keith C. Spurgeon, Chairman and CEO of Zany Brainy, Inc., said, "Because
both companies champion similar values, this partnership is a natural fit. We
consider this a great opportunity for our customers, employees, and
shareholders. This merger instantly increases our 1999 revenue base of $241
million by over 50 percent and our store base by a similar amount, strengthening
our presence in large markets like New York, Texas, Florida, and Michigan.
Moreover, we will seek to achieve operating and administrative synergies as we
integrate the businesses."
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Noodle Kidoodle's CEO Stanley Greenman said, "We are very excited by the
opportunities for both growth and profitability enhancement presented by the
joining of these two industry leaders. The merger definitely benefits both
companies."
Zany Brainy CEO Spurgeon will continue in his role of CEO in the new
company. Noodle Kidoodle CEO Greenman will be extensively involved with the
integration of the two companies and will join the Zany Brainy Board of
Directors.
First Quarter Earnings
Based on a review of preliminary quarterly information, Zany Brainy also
announced today that it anticipates its first quarter loss to be greater than
last year's first quarter loss. Commenting on the outlook for the quarter, Mr.
Spurgeon said, "As we mentioned in delivering our fourth quarter 1999 results,
sales of hot products such as Beanie Babies and Crazy Bones in the first half of
fiscal year 1999 will impact year over year comparisons."
During the first quarter of 1999, Beanie Babies and Crazy Bones accounted
for approximately 18 percent of Zany Brainy's sales. During February and March
of the current quarter, these products accounted for approximately 2 percent of
retail sales.
Zany Brainy plans on announcing its financial results for the first quarter
of fiscal 2000 on May 22.
Stanley Greenman also stated that Noodle Kidoodle's first quarter losses
are expected to exceed last year's first quarter losses. He attributed the
increased loss principally to a stark reduction in the sale of Beanie Babies
resulting from their reduced shipments in the quarter.
Noodle Kidoodle plans on announcing its sales results for the current first
quarter in early May.
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About Zany Brainy, Inc.
Zany Brainy, Inc. is a leading and rapidly growing specialty retailer of high
quality toys, games, books and multimedia products for kids. The Company is a
different kind of toy store with a unique product mission and a passionate
commitment to its customers. Zany Brainy believes learning should be fun. Its
products entertain, educate and spark the imaginations of children up to 12
years of age. The Company combines this distinctive merchandise offering with
superior customer service and daily in-store events to create an interactive,
kid-friendly and exciting shopping experience for children and adults. The
Company presently operates 104 stores in 26 states.
About Noodle Kidoodle
Noodle Kidoodle is an innovative specialty retailer of children's edu-tainment
products, which focus on stimulating, educational and non-violent merchandise.
The Company's stores typically include more than 16,000 items featured
throughout 20 in-store departments. Weekly events like sing-a-longs and
storytelling, and fun and interactive play areas like the Kidoodle Corner, and
Computer and Electronic Learning Centers make visiting Noodle Kidoodle fun for
the whole family. Noodle Kidoodle believes that kids learn best when they're
having fun, and is dedicated to expanding children's minds and helping their
imaginations grow. The Company opened its first Noodle Kidoodle store in 1993
and currently operates 59 stores in 15 states.
Certain statements in this report, including statements regarding the timing of
the merger and its impact on revenue, growth and earnings, the accounting
treatment for the merger, first quarter results and new store openings are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Actual results may differ materially from those indicated
in such statements due to a number of factors, including the ability to obtain
all necessary consents and approvals for the merger; unanticipated operational
challenges in connection with combining operations; delays in opening new
stores; the ability to retain key personnel; the availability of capital to fund
continuing operations of both companies and their affiliates; changes in
consumer spending patterns and in demand for popular products; the ability to
open and operate new stores on a profitable basis; and prevailing economic
conditions. Additional information on factors that may affect the business and
financial results of Zany Brainy or Noodle Kidoodle can be found in their
filings with the Securities and Exchange Commission.
The foregoing may be deemed to be offering materials of Zany Brainy, Inc. in
connection
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with the proposed merger of Zany Brainy, Inc. and Noodle Kidoodle,
Inc. on the terms and subject to the conditions in the Agreement and Plan of
Merger, dated as of April 21, 2000, among Zany Brainy, Inc., Noodle Kidoodle,
Inc. and Night Owl Acquisition, Inc.
SHAREHOLDERS OF ZANY BRAINY AND NOODLE KIDOODLE AND OTHER INVESTORS ARE URGED TO
READ THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE INCLUDED IN THE
REGISTRATION STATEMENT ON FORM S-4 WHICH ZANY BRAINY WILL FILE WITH THE SEC IN
CONNECTION WITH THE PROPOSED MERGER BECAUSE IT WILL CONTAIN IMPORTANT
INFORMATION ABOUT ZANY BRAINY, NOODLE KIDOODLE, THE MERGER, THE PERSONS
SOLICITING PROXIES IN THE MERGER AND THEIR INTERESTS IN THE MERGER AND RELATED
MATTERS. After it is filed with the SEC, the joint proxy statement/prospectus
will be available for free, on the SEC's web site (http://www.sec.gov), or by
directing a written or oral request for copies to either Daniel Kaufman, Vice
President - Legal, Zany Brainy, Inc., 2520 Renaissance Boulevard, King of
Prussia, PA 19406 (the telephone number is 610-278-7800), or Stewart Katz,
President, Noodle Kidoodle, Inc., 6801 Jericho Turnpike, Syosset, N.Y. 11791-
4428 (the telephone number is 516-677-0500).
In addition to the proposed registration statement and joint proxy
statement/prospectus, Zany Brainy and Noodle Kidoodle file annual, quarterly and
special reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information filed by either
company at the SEC's public reference rooms at 450 Fifth Street, N.W.,
Washington, DC 20549 or at the SEC's other public reference rooms in New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Zany Brainy's and Noodle
Kidoodle's filings with the SEC are also available to the public from commercial
document-retrieval services and on the SEC's web site at http://www.sec.gov.
Contact:
Zany Brainy, Inc.
Robert A. Helpert
Chief Financial Officer
610/278-7800
or
The MWW Group
Investor Relations:
Laura Kieley
Tel. 212/827-3740
Noodle Kidoodle, Inc.
Kenneth S. Betuker, Chief Financial Officer
516/677-0500 ext. 278
or
Morgen-Walke Associates
Heather Anthony/Kara DiCamillo
Press: Michael McMullan/Kate Talbot
212/850-5600
# # #
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THE FOLLOWING IS THE SCRIPT TO A ZANY BRAINY, INC. CONFERENCE CALL ON APRIL 24,
2000:
ZANY BRAINY, INC.
The MWW Group
Moderator: Mr. Keith Spurgeon
Operator Good morning, ladies and gentlemen, and welcome to the Zany Brainy
conference call. At this time all participants are in listen only
mode. Later we will conduct a question and answer session and
instructions will follow at that time. If anyone should require
assistance during the call, please press the star followed by the
zero on your touchtone phone. As a reminder, ladies and gentlemen,
this conference is being recorded.
Certain statements on this call, including statements regarding the
timing of the acquisition and its impact on revenue, growth and
earnings, the accounting treatment for the acquisition, first
quarter results and new store openings are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act. Actual results may differ materially from those
indicated in such statements due to a number of factors, including
the ability to obtain all necessary consents and approvals for the
acquisition; unanticipated operational challenges in connection
with combining operations; delays in opening new stores; the
ability to retain key personnel; the availability of capital to
fund continuing operations of both companies and their affiliates;
changes in consumer spending patterns and in demand for popular
products; the ability to open and operate new stores on a
profitable basis; and prevailing economic conditions. Additional
information on factors that may affect the business and financial
results of the Company can be found in filings of the Company with
the Securities and Exchange Commission.
I would now like to introduce your host for today's conference, Mr.
Keith Spurgeon, Chairman and CEO of Zany Brainy, Inc. Please go
ahead, sir.
KEITH Thank you, and good morning everyone and thank you for joining us
today. With me today is Bob Helpert, our Chief Financial Officer.
We're all very excited to talk with you today about a great
milestone in Zany Brainy's history--the acquisition of Noodle
Kidoodle. As you may know, we have been aggressively pursuing a
growth strategy aimed at leveraging the power and synergies of our
bricks, clicks, and catalogs sales channels. Since our IPO we have
demonstrated our
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commitment to broadening our market presence and growing revenues
through the opening of 21 new stores. Moreover, we have always
maintained a keen focus on profitable growth during this period of
rapid expansion.
Our agreement to acquire Noodle Kidoodle is a continuation of this
commitment. Once completed, it will further strengthen our position
as undisputed leader in our market segment. It will immediately add
an additional 59 stores to our store base, and grow our revenue by
approximately 55%. For example, last year's revenues for Zany
Brainy alone were $240 million. When combined, the company's 1999
revenue base is $377 million. The acquisition will also be
accretive to net earnings. Moreover, we expect to continue to
increase our store base to over 190 stores combined by the end of
the year.
I would like to outline and highlight the terms of the deal along
with its underlying rationale, and then discuss some of our
strategies to leverage the new power of the combined organization.
This acquisition will be paid for entirely in stock, and accounted
for as a pooling of interests. The exchange is approximately 1.23
Zany Brainy shares for each Noodle Kidoodle share outstanding,
after which Noodle Kidoodle shareholders will own approximately 30%
of the combined company. The acquisition will be a pooling of
interests.
Post closing, the company will operate as Zany Brainy. Over time,
all stores will be converted to the Zany Brainy brand. The combined
companies will trade under the current symbol ZANY. I will continue
as CEO of the new Zany Brainy. Stanley Greenman, currently CEO of
Noodle Kidoodle, will play an important role in the integration
process and will join our Board of Directors.
Of course, the transaction remains subject to shareholder and
regulatory approval, however we expect that it will be consummated
during our second quarter.
The rationale for the deal is quite clear. Noodle Kidoodle is a
natural fit for us. Zany Brainy and Noodle Kidoodle both have a
long and strong history of providing specialty children's toys and
a strong market presence, although
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primarily in different geographic regions. Our organizations also
have similar missions. The acquisition provides positive benefits
to both companies. It will provide increased market share for Zany
Brainy, as well as expanding our reach into new geographic regions.
It also enables the two companies to combine the "best of both" to
build a stronger, more profitable company that can better and more
conveniently serve its customers.
We anticipate a smooth integration process, and see a great deal of
opportunity to leverage resources and drive brand visibility and
awareness. This combination should increase our ability to gain
customers at a lower cost through an instant expansion of Zany
Brainy's bricks, clicks, and catalog sales channels.
To ensure that we successfully integrate Noodle Kidoodle's
operations, we have formed a strong leadership team to manage the
entire process. This team includes Arthur Andersen's Business
Consulting Group, which brings to us a proven methodology and
substantial experience in supporting successful acquisitions. We
anticipate the integration to be completed during the second half
of fiscal 2000, and will provide regular updates on progress.
Our plan post acquisition is to achieve operational and
administrative synergies as we integrate our businesses to achieve
cost savings, lower overhead, and grow revenues. We anticipate that
several million dollars can be saved through efficiencies from
scale of operations, elimination of duplicative processes and
sharing of best practices.
In summary, I am confident that Zany Brainy's acquisition of Noodle
Kidoodle is a winning proposition for customers, associates, and
shareholders of both companies.
I welcome any questions you may have.
