Mega Brands Inc. shares plummeted today after the company announced its third global recall of magnetic toys and ordered the removal of remaining supplies of the China-manufactured product from store shelves.
The recall announcement prompted Mega Brands shares to fall 9.2% or 47 cents to $4.64 in trading Monday morning on the Toronto Stock Exchange. Over the past year, shares have fallen from $26.87 to a low of $4.21.
The “voluntary” recall of 2.4 million units produced since 2004 covers MagnaMan action figures and Magtastik and Magnetix Jr. pre-school toys.
The company said magnets in small flexible parts can detach and, if swallowed, can attract each other and cause intestinal perforations or blockages.
“They are flexible. If you bend it enough the magnet can pop out,” said Mega Brands spokesman Harold Chizick.
Mega Brands said it and the U.S. Consumer Product Safety Commission are aware of 44 reports in the United States of magnets coming loose, including one case of a three-year-old boy receiving medical treatment to remove a magnet from his nose and a report of an 18-month-old found with a magnet in his mouth but not swallowed.
The design of the newly recalled products predates the redesign of the Magnetix building system, following two recalls that cost tens of millions of dollars in expenses and litigation.
In the new recall, consumers are being instructed to return the affected toys to Mega Brands for a free replacement toy.
Monday’s recalled products were sold at toy stores around Canada and the United States between January 2005 and December 2007. The recalled products represented sales of $7 million last year.
Chizick wouldn’t say when the company first learned of the latest problems, but said it agreed to proceed with a recall after evaluating the products of complainants.
The recall is sure to be yet another black eye for the Montreal-based toy company. It had hoped its problems were behind it after teaming with Intertek, one of the world’s leading testing authorities, to redesign its Magnetix toys. The new product Magnext were slated to begin hitting store shelves this summer.
Chizick said Mega Brands has no intention of selling its magnetic line of toys. The product was acquired from Rose Arts Industries in 2005 for US$350 million. Mega Brands said it has received several offers, including one from the Rosen brothers, to purchase the remaining stationary division.
