The world's biggest toy company already owns brands that include Hot Wheels and Power Wheels. It said it will pay 17.75 Canadian dollars ($15.96) per share for Mega Brands. The companies said the price includes debt.
The announcement comes nearly a month after Mattel reported on a disappointing holiday season, saying in January that sales of key toys like Barbie and Fisher-Price preschool items dropped in its fourth quarter.
Mattel Inc. said that the acquisition will help it expand into two of the fastest-growing toy categories: construction building sets and arts and crafts. Mega Brands is widely known for its Mega Bloks construction sets, which include plastic blocks in an assortment of colors that can be snapped together to create various objects.
Aside from Mega Bloks, Mega Brands' arts and crafts brands include Rose Art and Board Dudes. Its existing licensed brands include Hello Kitty, Call of Duty and SpongeBob SquarePants.
Mega Brands estimates its sales totaled $405 million in 2013. The Canadian company's board unanimously approved the acquisition.
Mattel, which is based in El Segundo, Calif., said that it plans to fund the deal with available cash and new debt.
Mega Brands' board may end the Mattel agreement for an unsolicited superior proposal, but only under certain circumstances that were not specified. Mattel would have the right to match the superior bid. If the deal were to be ended, Mega Brands would have to pay a $12 million termination fee to Mattel.