For the cost of quality, Hasbro’s $5B Peppa Pig offer looks a bit lean
Studio eOne has what the toymaker lacks: prestige
At first glance, Entertainment One Ltd. and Hasbro Inc. make for ideal bedfellows.
The Toronto-based studio makes kids TV hit Peppa Pig, the latter is the world’s biggest toymaker. Merge one with the other and you get a combined video and merchandising giant.
That’s why there’s sound strategic rationale for Hasbro’s planned acquisition of eOne for the equivalent of about $5 billion. It gets its trotters on some valuable kids’ franchises that it can turn into more toys, and it can use eOne’s TV and film production chops to exploit its own catalogue of games.
Hasbro has a decent if not stellar track record of turning its game franchises into films. The Transformers and G.I. Joe movies have done well at the box office, though no one would accuse them of being critical successes. That’s where reservations about the eOne deal come in. While it might be known as the firm behind Peppa Pig, the cartoon represents just 10 per cent of its total revenue. The company’s family and brands business is expanding quickly, but its film and television division, which has made films such as Green Book and TV shows including The Walking Dead, contributes more sales and profit. It has something that Hasbro lacks: prestige. Darren Throop, the eOne CEO, prides himself on the quality of the film and TV productions. It’s easy to see how eOne stalwarts might find the prospect of churning out Hasbro spinoffs hard to stomach.
The deal logic holds up on paper: $210 million of anticipated synergies by 2022 could lead to returns from the deal nearing 8 per cent based on analyst earnings forecasts, just about covering the cost of capital. And that’s before any upside from selling more toys or making more films.
The plethora of competing streaming services has sparked a fight for high-quality content, and eOne has some of the best, helped by relationships with Steven Spielberg and superproducer Mark Gordon. That might make eOne an equally tasty morsel for someone else.