Toy company Mattel Inc. (NASDAQ: MAT) said Friday that it has reached an agreement to acquire Canada’s Mega Brands for about $460 million, including debt. That represents a premium of 36% to Mega Brands’ close on in Toronto on Thursday.

Mattel intends to fund this acquisition through a combination of new debt and cash on hand. The deal does allow the Mega Brands board of directors to possibly terminate the agreement in favor of an unsolicited superior proposal, subject to a termination fee of $12 million to Mattel, as well as the right of Mattel to match the superior proposal.

Unless toy maker Hasbro Inc. (NASDAQ: HAS) steps up with a superior bid, Mattel will be set to extend its revenue dominance over its smaller rival. Hasbro, maker of Monopoly, G.I. Joe and Play-Doh, made $4.08 billion last year, while Mattel, maker of Barbie and Hot Wheels, pulled in $6.48 billion.

Montreal-based Mega Brands produces construction toys, games, puzzles and arts and crafts. Its brands include MEGA Bloks, MEGA Puzzles and Rose Art. Mattel Chairman and CEO Bryan G. Stockton said:

A key pillar of our global growth strategy is the strategic acquisition of brands that will both benefit from our scale and help extend our reach into new and growing categories. The construction play pattern is popular, universal and has had one of the fastest growth rates over the past three years. We look forward to helping MEGA Brands accelerate its global growth, providing more choices for more children and their families.

Shares of both Mattel and Hasbro were inactive in premarket trading Friday. The former closed at $37.15 Thursday, in a 52-week range of $34.98 to $48.48. The latter ended the day at $55.03, near the top of its a 52-week range of $39.88 to $55.25.

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