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Hasbro Acquires Entertainment One in $4 Billion All-Cash Deal

Toymaker Hasbro is acquiring studio Entertainment One in an all-cash transaction valued at $4 billion, bringing My Little Pony and Nerf under the same umbrella as “Peppa Pig” and “PJ Masks” and furthering Hasbro’s growth goals in the infant and preschool categories.

Hasbro aims to expand its operations in film and TV. Entertainment One’s production infrastructure in multiple markets and its children’s programming IP made it an attractive target for Hasbro. Sources say the news came as a surprise to most people at Entertainment One.

Top eOne execs will join the Hasbro team, said the companies in a joint statement. The independent studio pointed to its kid-friendly fare, noting that it has been transforming its business to focus on “high-quality premium talent-driven content,” including its “Clifford the Big Red Dog” and “Monster Problems.”

But the sale to Hasbro raises questions about whether eOne will remain in the business of producing adult-focused movies and TV series. Entertainment One’s active slate includes Netflix’s “Trailer Park Boys” and We TV’s “Growing Up Hip Hop: New York.”

On the investor call after the market close Thursday, Hasbro CEO Brian Goldner highlighted the potential to mesh eOne’s strength as a studio with Hasbro’s intellectual property.

“With eOne’s content creation capabilities … we can reach audience on all screens,” including cable and streaming, he said on the call.

Hasbro and Paramount Pictures in 2017 inked a deal to make live-action and animated films based on the toymaker’s intellectual property, but execs on the call indicated that that partnership would continue, even after the acquisition of eOne, opening the door to Paramount to further develop Hasbro’s IP.

Noting that eOne is profitable and that half of its EBITDA last came from its family brand portfolio, Goldner called “Peppa Pig” and “PJ Masks” “highly profitable and merchandisable.”

Per the terms of the deal, eOne shareholders will receive 5.60 pounds per common share, a 31% premium to eOne’s 30-day volume weight average price as of Thursday. Hasbro said the deal will be financed with the proceeds of debt financing and $1 billion to $1.25 billion in cash from equity financing.

“The acquisition of eOne adds beloved story-led global family brands that deliver strong operating returns to Hasbro’s portfolio and provides a pipeline of new brand creation driven by family-oriented storytelling, which will now include Hasbro’s IP,” said Goldner in a statement. “In addition, Hasbro will leverage eOne’s immersive entertainment capabilities to bring our portfolio of brands that have appeal to gamers, fans and families to all screens globally and realize full franchise economics across our blueprint strategy for shareholders. We are excited to welcome eOne’s talented employees from around the world into the Hasbro family.”

Adding eOne to Hasbro will be accretive to adjusted EPS in the first year after the transaction, with mid- to high-teens accretion to adjusted EPS in the third full year after the close of the deal.

Entertainment One chairman of the board Allan Leighton said that he is “very pleased by this exciting development,” calling it a testament to eOne’s management vision, leadership and execution.

“Hasbro’s portfolio of integrated toy, game and consumer products, will further fuel the tremendous success we’ve achieved at eOne,” said eOne CEO Darren Throop. “There’s a strong cultural fit between our two companies; eOne’s stated mission is to unlock the power and value of creativity which aligns with Hasbro’s corporate objectives. eOne teams will continue to do what they do best, bolstered by the access to Hasbro’s extensive portfolio of richly creative IP and merchandising strength. In addition, the resulting expanded Hasbro presence in Canada through eOne’s deep roots will bring world class talent and production capabilities to Hasbro. Along with our leadership team, I look forward to working with Hasbro on our joint growth and success for many years to come.”

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