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Lego shakes up its structure to seek new deals

Lego is undertaking the biggest organisational shake-up in its 84-year history, in a move aimed at exploiting its toy brand more broadly after a decade of strong growth for the maker of plastic bricks. 

Under the Danish toymaker’s new structure, its current chief executive, Jorgen Vig Knudstorp — who rescued the brand from near financial collapse in 2004 — will become chairman, taking over from Niels Jacobsen.

He will be replaced as chief executive by the first non-Dane to lead the company, British chief operating officer Bali Padda. 

Mr Knudstorp will also be chairman of a new entity, called the Lego Brand Group, which is being set up to allow private family shareholders become more active owners and have more say on the boards of Lego-related businesses. His deputy chairman will be Thomas Kirk Kristensen, the great-grandson of Lego’s founder. 

“We want to explore new avenues for the brand,” Mr Knudstorp told the Financial Times. “There is more room for partnerships. More and more people are knocking on our door.”

These changes come at a pivotal time, as Lego’s founding family moves into its fourth generation and the company takes stock after increasing its revenues fivefold since 2004 to become the world’s most profitable toymaker

But Mr Knudstorp insisted the structural change was not a precursor to the Kristensen family selling out its 75 per cent shareholding, or the company shifting strategy. Instead, he said it was an attempt to do something “additive”. 

He described the role of the Lego Brand Group as being “kind of like a private equity owner” that finances various different ventures from the cash flow of the main brand. He drew a further parallel to private equity ownership by saying the family would look far more at the composition of each board and whether specific skills were needed. “Why not have a board member for India for three or four years, that has that expertise?” he asked. 

Assets that will be placed into the Lego Brand Group include the family’s stake in Lego; its 30 per cent stake in Merlin Entertainments, the operator of the Legoland theme parks; and the Lego Education brand for using the plastic bricks in schools. 

Mr Knudstorp said one opportunity for the new entity to consider arose on a recent trip to China, when locals asked him: “How about Legoland [or] Lego Education in China?” 

Mr Padda will take over as chief executive of Lego on January 1 while Mr Knudstorp will become the group’s chairman and Mr Kristensen its vice-chairman in May.

Mr Kristensen will be chairman of the Lego Foundation, which hands out charitable grants and owns the other 25 per cent of the toymaker. Mr Knudstorp will act as the foundation’s vice-chair.

Mr Padda told the Financial Times that he would stick to the strategy he helped formulate in his 14 years at the toymaker. He said Lego needed to boost its “capabilities” to deal with a doubling in the number of its employees in the past five years. 

“We have to create a mindset of a much smaller company than we are so we become a lot more agile . . . We just need to ensure we have the capabilities that are needed to ensure the expansion can be met,” Mr Padda added.

Via FT