In December 2019, Hasbro, its headquarters GI Joe, Transformers and Dungeons & Dragons brands, closed a $3.8 billion deal for Entertainment One, a producer with a library of 6,500 titles and popular cartoons such as Peppa Pig and PJ Masks.
The toymaker soon regretted the move, and last May — when Hasbro was fending off a proxy battle from activist investor Alta Fox, which tried to get it to exit its toy division — it called the timing of the studio purchase “unfortunate.” , stating he overspent.
Now Hasbro is offloading eOne, revealing on Nov. 17 that it hired bankers to explore a sale of the studio but keep the IP as Peppa Pig. That’s a nod to investors who urged the company to sell some of its eOne stake to reinvest in fewer, more profitable properties and outsource it to reduce costs and risk. Wall Street analysts applauded the move.
“It makes a lot of sense for eOne to scale back, as there are a number of non-core assets in that business that don’t necessarily fit the Hasbro flywheel,” says MKM Partners’ Eric Handler. The analyst adds that Hasbro will retain its family-owned content business and, like rival Mattel, relies on production deals with studios and steamrollers and major talent across Hollywood. “They just need to maintain enough infrastructure and staff to help Hasbro IP become successful film or television projects,” Handler notes.
The idea of becoming a Hollywood producer a la Marvel Studios was pioneered by CEO Brian Goldner, who died in October 2021. His successor, Chris Cocks, is more focused on building Hasbro into a gaming powerhouse, including its profitable Magic: The Gathering and Wizards of the Coast franchises.
Instead of going through the expensive process of producing titles, Hasbro can simply leverage its IP catalog for Paramount projects like the 2023 releases Transformers: Rise of the Beasts and Dungeons & Dragons: Honor Among Thieves.
As Hasbro investor Fredrick DiSanto wrote in a letter to management in May: “Hasbro does not need to own eOne to bring Dungeons & Dragons to the big screen, like George RR Martin didn’t need his own production studio to bring it Game of Thrones in life.”
News of a sale process is not expected. The gaming giant pointed to the previous sale of eOne’s music business for $385 million as “not core to our brand strategy”. And eOne’s divestiture move also follows division CEO Darren Throop in August, who announced he would leave the company when his contract expires at the end of 2022.
Now, everything else on eOne is also surplus due to Hasbro’s focus on fewer, bigger brands. “This is positive because it will allow Hasbro to deleverage faster and get rid of non-core businesses where performance is difficult to project and which distract from the operation of the strategic parts of the business (toys, tabletop and digital games),” DA Davidson analyst Linda Bolton Weiser wrote in a Nov. 17 note.
Hasbro said it retained JP Morgan and Centerview Partners to sell eOne days after a Nov. 14 investor note from Bank of America claimed the toy giant was “destroying its long-term value” Magic: The Gathering property by selling too many trading cards triggered a sharp sell-off in its stock price.
Regarding the sale process, the company revealed in a filing that it “expects the process to take several months. In the meantime, Hasbro’s entertainment team will continue to operate under the eOne brand.”
Hasbro investor DiSanto, head of Ancora Holdings, also struck a bullish note, stating that “the divestiture of eOne can improve the Company’s long-term position by allowing it to deleverage, reduce operational complexity and reinvest in key areas and high-quality brands with strong growth trajectories.”
Hasbro shares rose $2.45, or a little more than 4 percent, to $58.42 in late trading Thursday.