Hasbro buying Toronto based Peppa Pig maker for US$4B
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’s also getting some children’s brands, like Peppa Pig, that will help its quest to expand into foreign markets like China. It’s the toymaker’s biggest deal ever, according to data compiled by Bloomberg.
“This can take their business to another level,” said John Tinker, an analyst for Gabelli & Co.
Under the terms of the all-cash transaction, Entertainment One shareholders will receive 5.60 pounds for each common share, which Hasbro said represents a 31 per cent premium to its 30-day average price. Hasbro’s shares slipped in late trading.
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 deal will 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.
And 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 them 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 U.S.
“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 Chief Executive Officer Brian Goldner said in a call with analysts following the deal’s announcement. He added 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 shares fell 4 per cent to US$109.80 at 4:44 p.m. in late trading in New York. The stock has gained 41 per cent so far this year.
Tinker also noted that the declining value of the British pound made Entertainment One, which is listed in London, a better deal for an American company.
Hasbro executives said share buybacks will be halted and that cash will instead be allocated to paying down debt. The company will maintain its dividend program.
Chief Financial Officer Deborah Thomas said the company wants to keep its investment grade rating and will look to finance the deal via term loans, bonds and proceeds from an equity offering of $1 billion to $1.25 billion.