Mattel HQ

According to sources close to the two companies, Mattel and Hasbro may be looking to form a toy powerhouse.

Bloomberg Business is reporting that 'people familiar with the matter' are saying that Hasbro – the company behind properties such as G.I. Joe and Transformers – approached Mattel – think Barbie – late in 2015 about a potential merger. Should such a deal go through, it would form a mega company that would control nearly one-quarter of the U.S. toy market. While this may lead many to think that it would face antitrust scrutiny, the belief is that it would sail through the review due to the number of other toy companies in the marketplace.

As to why these two companies would want to merge may seem a bit odd from the outside. As someone who covered the toy industry professionally in the 1990s, and still follows it, this potential deal makes complete sense. Mattel has always lacked a strong boys toys brand outside of Hot Wheels, but it excels girls toys with the likes of Barbie and American Girl. Hasbro, on the other hand, has lagged severely behind in the girls aisle of toy stores with the exception of the recent explosion of My Little Pony. These two companies would be the perfect compliment to one another.

Now is the time for Mattel to strike, however, as it is due to lose the Disney Princesses licenses at the end of the year to Hasbro which will take over production of dolls such as those based on the international hit Frozen.

Adding fuel to the fire of the merger talks is that both companies are currently actively pursuing Hollywood for film projects. Hasbro has set up an entire plan to merge all of its properties into one shared universe with the likes of G.I. Joe, Transformers, M.A.S.K. and more crossing over with one another. Meanwhile, Mattel is in the midst of trying to get a new He-Man and the Masters of the Universe film off the ground as well as shopping around other properties it owns. The combination of the two intellectual property portfolios would be very enticing to movie studios.

This isn't the first time the two companies have discussed a potential merger. The last time was in 1996 when Mattel made a $5.2 billion bid for Hasbro, but ultimately dropped it when Hasbro fought hard against the proposition. Currently Mattel is valued at around $11 billion with Hasbro trailing behind at $9.5 billion.

CNBC is reporting that talks have not progressed beyond the initial stages that came at the end of the year, but that still leaves room to speculate that the deal is not yet dead.