TOYS: 2 GROUPS OFFERING $5.5B

Two rival bidders are joining forces to compete in what is turning out to be a topsy turvy auction for Toys ‘R’ Us, The Post has learned.

Buyout firm Kohlberg Kravis Roberts has teamed with a rival consortium consisting of Bain Capital and Vornado Realty Trust, in a deal that could be worth more than $5.5 billion.

The newly formed team is expected to face competition from a rival group led by Cerberus Capital Management, which has indicated that it plans to bid for all of Toys ‘R’ Us, including the faster growing Babies ‘R’ Us chain.

The final bids are to be considered at a Toys ‘R’ Us board meeting scheduled for today, and a winner is expected to be announced shortly.

As The Post first reported last week, the auction took an unusual turn when a suitor submitted an offer for all of Toys ‘R’ Us, forcing the company to rethink its plan to sell just the global toy division.

Credit Suisse First Boston, the investment bank conducting the auction on behalf of Toys ‘R’ Us, subsequently urged potential suitors to revise their bids to include the entire company, prompting Cerberus to come forward with a fresh offer.

The move by CSFB to broaden the auction came as Toys ‘R’ Us had begun to narrow the list of potential suitors for the toy division, believed to be worth $3.5 billion to $4 billion.

In addition to KKR, the Cerberus consortium and the team of Bain and Vornado, a fourth bidder, made up of Apollo Advisors and Pemira Advisors, submitted an offer for the toy chain. It remains unclear whether this fourth group will come forward with an offer for the entire company.

Although Toys ‘R’ Us has indicated that it is amenable to selling the whole company, it is also retaining the option of selling just the toy division.

A spokeswoman declined to comment. Representatives for Bain, Cerberus and Toys ‘R’ Us could not be immediately reached for comment.

Toys ‘R’ Us shares have climbed steadily since August, when the company announced plans to split its global toy division, which consists of 1,136 stores in the United States and overseas, including licensed and franchise operations.

Toys ‘R’ Us shares closed up 34 cents to $24.09 in New York Stock Exchange Trading yesterday.