After years of longing, Hasbro Inc can finally call itself a full-fledged entertainment company.
The toymaker agreed to spend US$4 billion to buy Entertainment One Ltd., a small studio adept in making movies, television shows, animation and music.
It is also getting some children’s brands, like Peppa Pig and PJ Masks, that will help its quest to expand into foreign markets like China.
Photo: AP
it is the toymaker’s biggest deal ever, according to data compiled by Bloomberg.
“This can take their business to another level,” Gabelli & Co analyst John Tinker said.
The transaction marks a major expansion of Hasbro’s media efforts, as well as another example of the race to pick up content owners and producers as a plethora of video-streaming companies come onto the scene.
The decline in the British pound made the valuation of Entertainment One, which is listed in London, more attractive, and the deal comes just days after Hong Kong’s Li family agreed to pay US$3.3 billion for UK pub operator Greene King PLC.
Under the terms, Entertainment One shareholders would receive ￡5.60 in cash for each common share, 26 percent more than Thursday’s closing price.
Hasbro’s shares slipped in late trading, while Entertainment One surged as much as 31 percent in early trading yesterday in London, trading above the bid price.
The deal would give the toy company Entertainment One’s scripted and unscripted TV production and development capabilities, which include animated and live action shows.
Hasbro has been a driving force in turning toy properties like Transformers into entertainment, but until now, it has mostly had to license its characters to studios to make films, Tinker said.
Moreover, after years of looking for an entertainment company to buy, including dalliances with Lions Gate Entertainment Corp and DreamWorks Animation, Hasbro has finally locked up a deal that equips it to make larger films, he added.
The acquisition also expands Hasbro’s global reach, by adding a major international brand to its portfolio.
Peppa Pig is a global success, with big viewership in China, and new brand Ricky Zoom has the makings of a hit, too, Tinker said.
About half of Entertainment One’s revenue comes from outside the US.
UK broadcaster ITV PLC bid ￡1 billion (US$1.2 billion) for Entertainment One in 2016, but the production company refused to enter talks.
“We see opportunities for emerging markets. It’s also heartening to see that eOne has gotten great traction in markets like China for Peppa,” Hasbro CEO Brian Goldner said in a call with analysts following the deal’s announcement.
He added that the tie-up gives the company “a real opportunity for a beachhead that can go in China for many years to come.”
Hasbro plans to plug these characters into a brand-building infrastructure that has turned dormant properties like My Little Pony into massive revenue generators.
Hasbro executives said share buybacks would be halted and that cash would instead be allocated to paying down debt.
The company would maintain its dividend program.
Chief financial officer Deborah Thomas said the company wants to keep its investment grade rating and would look to finance the deal via term loans, bonds and proceeds from an equity offering of US$1 billion to US$1.25 billion.
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