WAYNE, NJ-A new suitor is apparently in the hunt for the retail toy business of struggling Toys ‘R’ Us, joining the previously identified Kohlberg Kravis Roberts, Bain Capital, Cerberus and others in the game. Permira and Apollo Advisors, both private equity firms, have teamed up, reportedly, to submit a joint bid for the business, which comes with an estimated $3.5 billion price tag.

According to sources, Permira, which opened up shop 20 years ago in London and has seven offices in Europe and one in New York, was initially interested only in Toys’ stronger European operations, but company officials have said repeatedly that they don’t intend to sell the business off piece by piece. The New York-based Apollo has apparently been brought to the table to add muscle to a bid for the whole 1,200-store operation. That bid, if successful, could lead to an eventual separation of the domestic and international operations anyway, according to sources.

A spokesperson for Toys ‘R’ Us declined to comment on the potential sale of the operation. Permira and Apollo could not be reached for comment.

As part of its ongoing effort to right its financial ship, Toys ‘R’ Us, based here, has already sold off its Kids ‘R’ Us operation. If and when the retail toy business is disposed of, the company would be left with just its more successful Babies ‘R’ Us division, which company officials have indicated is not for sale.

During the company’s recent Q3 earnings conference call, Toys’ chairman/CEO John Eyler declined to comment on the possible sale, other than to reiterate that the company’s strategic review of its operations “is continuing. We will not comment further until our board reaches a decision on the specific steps that will be taken to separate the ownership of Babies ‘R’ Us from the toy business. We still believe the separation will occur during the first half of 2005.”

As reported by GlobeSt.com, the company’s Q3 results came in with a net less of $25 million for the period, compared to a $46 million loss a year earlier. For the nine months, Toys also reported net earnings of $8 million compared to a net loss of $83 million a year earlier.

Operating losses, meanwhile, came to $11 million for Q3, compared to a deficit of $43 million a year earlier. For the nine months, operating losses were $218 million compared to last year’s $41 million.

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