A Hasbro Monopoly board game arranged in Dobbs Ferry, Recent York, Feb. 6, 2022.
Tiffany Hagler-Geard | Bloomberg | Getty Images
4 years after acquiring Toronto-based production studio eOne, Hasbro is selling it off to Lionsgate.
The deal, announced Thursday, is valued at $500 million. That price tag consists of $375 million in money and the idea of production financing loans.
The Rhode Island-based toymaker plans on using the proceeds to pay down its floating rate debt because it refocuses on its toy and game businesses. Without eOne, Hasbro will even return to licensing and partnerships with studios to fund entertainment projects for brands resembling Dungeons and Dragons, PlayDoh, Magic: The Gathering and Transformers.
“This announcement is consistent with our expectations, but must be welcomed news (in our opinion) for investors, as we consider the divestiture results in higher money flow generation and earnings power for the biz,” wrote Drew Crum, analyst at Stifel, in a research note Thursday.
Hasbro acquired eOne in 2019 for $4 billion, a price tag that included coveted preschool brands resembling Peppa Pig and PJ Masks. Hasbro retains ownership of those properties within the wake of the eOne sale. Lionsgate will get access to eOne’s library of nearly 6,500 titles, including “Grey’s Anatomy,” “The Rookie,” “Yellow Jackets” and “The Woman King.”
Hasbro initially sought to sell eOne back in November so it could divest television and film projects that were in a roundabout way supporting its brands.
“We had thought Hasbro would have been in a position to receive a higher price for eOne but are at the least glad to have some finality to the sales process and have the corporate move forward with its Blueprint 2.0 strategy,” wrote Eric Handler, managing director at Roth MKM, in a research note Thursday.
The corporate noted that the eOne business had been spending about $500 million to $600 million in production dollars annually, an expense Hasbro is not going to be making going forward.
The sale coincidentally comes amid the writers and actors strike, which has essentially shut down Hollywood. This disruption is predicted to push full-year revenue for the toymaker down 3% to six%, the corporate said Thursday.
Without eOne, Hasbro will proceed to depend on partnerships with studios resembling Paramount for theatrical releases and tv productions.
“We purposely stated on this release that we’re a leading toy and game company,” said Hasbro CEO Chris Cocks in the course of the company’s earnings call Thursday. “We’re squarely focused on that. And I’d say the emphasis is on the gaming a part of that.”
A give attention to toys and games
The asset-light model is identical one which rival Mattel has been implementing since its film division was established in 2018. Utilizing third-party studios and distributors to create content minimizes financial risk for Hasbro, as it can not need to take a position significantly in production.
Sure, potential box office gains are minimized when a studio is fronting the production money, but positive word of mouth from blockbuster hits can result in merchandise sales and brand loyalty.
While Mattel saw a dip in dolls sales last quarter, it’s forecasting a turnaround following the discharge of “Barbie.”
“The success of the ‘Barbie’ movie is a milestone moment for Mattel, and it truly is a showcase for the cultural resonance of the brand,” said Richard Dickson, chief operating officer at Mattel, in the course of the company’s July earnings call. “As we have seen, the success is way beyond the film. We have seen [point-of-sale] impacted on our toy business, on our consumer product partner business, which has really begun to speed up meaningfully.”
The corporate had greater than 165 different consumer product partnerships and experiences tied to the film’s release.
Meanwhile, Hasbro noted a $25 million production asset impairment charge for “Dungeons & Dragons: Honor Amongst Thieves” whilst the film helped drive revenue growth in the corporate’s franchise division.
Along with specializing in its IP for film and TV content, Hasbro can also be investing heavily in digital gaming. Already, it has found success with “Magic: The Gathering Arena” and is anticipating big gains from the upcoming release of “Baldur’s Gate 3.”
CEO Cocks called the video game “the equivalent of a blockbuster movie release,” noting that the corporate believes the sport has the potential to be a game-of-the-year contender, but a rallying point for the Dungeons and Dragons brand.
“We’ll likely make more cash on ‘Baldur’s Gate 3’ than we have now made on all of our film licensing for the last five to 10 years, combined,” he said.