Dive Brief:

• Toys R Us has a buyer for its operations in Germany, Austria and Switzerland. The bankrupt toy retailer said in a securities filing last week that Irish toy chain Smyths Toys Superstores has made an offer of $96.6 million (€79 million).
• With the acquisition, Smyths — which according to GlobalData research had been stealing share from Toys R Us in the U.K. for years — would rebrand the stores under its own banner.
• Separately, Toys R Us canceled an auction for its Canadian business after it failed to receive any qualified bids outside the $236 million stalking horse bid from Canadian investment firm Fairfax Financial, making Fairfax the owner of the unit once a bankruptcy approves the sale. Toy mogul Isaac Larian has dropped his pursuit of the Canadian unit and is now focused on buying as many as 274 Toys R Us stores in the U.S. to preserve the retailer domestically, according to the L.A. Times.

Dive Insight:

Liquidation doesn't have to be the end of a retailer. Retail brands can survive as product labels and e-tailers. And competitors, holding companies and financiers of all stripes often buy up pieces of a collapsing company.

In the U.K., Smyths has taken more share from Toys R Us than Amazon, according to GlobalData. In a February note, regarding the impending liquidation of Toys R Us' U.K. business, GlobalData analysts said that Toys R Us' "failure to react in terms of the shopping experience, pricing and its own website, is in stark contrast to the more imaginative reaction of Smyths, and to a lesser extent The Entertainer."

The sale to Smyths will go to repaying creditors, as will the sale of the Canadian unit and prospective sale of Toys R Us' Asian and Central European businesses.

In Canada, Fairfax presents an interesting owner for Toys R Us' operations there. Eric Matusiak, a partner with consulting firm BDO Canada, said in an interview with Retail Dive that the firm has invested funds from its insurance business into a "quiet" private equity company that seems focused on long-term investments. Fairfax has acquired an upscale sports retailer and a housewares seller, among others in Canada, typically without advanced reports or talk of a future initial public offering, Matusiak said.

"I don't know what they're thinking on Toys R Us," he said, but believes Fairfax possibly saw an opportunity to improve the retailer or saw value in the company's store sites as retail square footage is in sparse supply in Canada (especially compared to the U.S.). Matusiak thinks the retailer's best bet in the country would be to go further up market and turn some of the store space over to experience-based retail, such as a professional gaming venue.

In the U.S., Larian appears to be the retailer's only white knight ready to put up money to save some fraction of Toys R Us' domestic operations. So far, his efforts have won publicity, but no immediate results.

If Larian does make a successful play for 200-plus stores, it would save a crucial distribution channel for his business and other toy makers. But he has to compete against the money potentially offered to liquidate the sum of Toys R Us' parts in the U.S. As we saw recently with Bon-Ton, liquidation bids can prevail over high-minded bids to save a retailer's business