In December 2019, Hasbro is at home GI Joe, transformers and dungeons Marken, closed a $3.8 billion deal for Entertainment One, a producer with a library of 6,500 titles and popular animated films such as Peppa Pig and PJ Masks.
The toymaker soon regretted the move, and last May — as Hasbro fought off a proxy fight from activist investor Alta Fox trying to get him to spin off its games division — it called the timing of the studio purchase “unfortunate,” indicating it has spent too much.
Now Hasbro is unloading eOne, announcing on November 17 that it has hired bankers to consider a sale of the studio but how to keep IP Peppa Pig. That’s a nod to investors who have asked the company to sell off part of eOne to reinvest in fewer, more profitable properties, doing so with outside partners to reduce costs and risk. Wall Street analysts welcomed the move.
“Reducing the size of eOne makes a lot of sense as there are a number of non-core assets in this business that don’t necessarily fit into Hasbro’s flywheel,” says Eric Handler of MKM Partners. The analyst adds that Hasbro will retain its family content business and, like rival Mattel, will rely on production deals with studios and steamers and big talent across Hollywood. “You just need to have the infrastructure and staff to take Hasbro IP to a successful film or television project,” notes Handler.
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 as a gaming powerhouse, including its lucrative ones Magic the Gathering and Wizards of the Coast Franchise.
Instead of going through the expensive process of producing titles, Hasbro can simply use its IP catalog for projects at Paramount like 2023 releases Transformers: Rise of the Beasts and Dungeons & Dragons: Honor Among Thieves.
As Hasbro investor Fredrick DiSanto bluntly wrote in a May letter to leadership, “Hasbro doesn’t have to own eOne to bring it dungeons to the big screen, much like George RR Martin didn’t need its own production studio to bring with it game of Thrones to live.”
News about a sales process is rarely unexpected. The toy giant cited eOne’s earlier sale of its music business for $385 million as “not core to our branding strategy.” And the move to divest eOne also follows Darren Throop, the division’s CEO, in August announcing he will leave the company when his contract expires in late 2022.
Now almost everything else in eOne is also redundant to Hasbro’s focus on fewer, bigger brands. “That’s positive because it will allow Hasbro to deleverage faster and get rid of non-core businesses that are difficult to predict in performance and distract from running the strategic parts of the business (toys and tabletop and digital games,” DA Davidson analyst Linda Bolton Weiser wrote in a Nov. 17 note.
Hasbro said it hired JP Morgan and Centerview Partners to sell eOne just days after a Nov. 14 investor statement from Bank of America that claimed the toy giant was “destroying the long-term value” of its company Magic the Gathering Ownership by selling too many trading cards triggered a sharp sell-off in the stock price.
Regarding the sales process, the company said in a filing that it “anticipates that the process will take several months. In the meantime, Hasbro’s entertainment team will continue to operate under the eOne production brand.”
Hasbro shares were up $2.45, or just over 4 percent, at $58.42 at Thursday’s close.