US toy company Hasbro has bid for Entertainment One (ETO) as part of its strategy to expand its brand portfolio. The group offered 560p a share for the studio, valuing it at around £3.3bn.
The shares surged past the offer price following the announcement, presumably in anticipation of rival offers. Broker Numis said that while 560p was a fair price, it was “not necessarily knock-out value” if other companies in the media, entertainment or digital sectors saw the opportunity for greater synergies.
This comes three years after a similar bid from ITV (ITV), which Entertainment One’s board rejected on the grounds that the 236p a share offer “fundamentally undervalued” the company.
Hasbro expects the deal will drive $130m (£106m) in savings through insourcing Entertainment One’s toy business and improving profitability in licensing and merchandising.
In response to news of the bid, shares in toy and game manufacturer Character Group (CCT) - which has a licence to manufacture Peppa Pig merchandise - plummeted by around a fifth. That licence will be up for renewal from December 2020.
Character has a separate licence with Hasbro for its Stretch Armstrong action figure, but it is unclear whether they will be able to extend this to include the original Peppa Pig business. By way of comparison, in 2018 Stretch accounted for 9 per cent of Character Group’s revenue compared to the 21 per cent contributed by the Peppa Pig brand. A spokesperson for the manufacturer said it was “business as usual”, since the acquisition is yet to be finalised.
