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Why Hasbro put a “For Sale” sign on Entertainment One

In December 2019, Hasbro, home of GI Joe, Transformers and Dungeons and Dragons brands, signed 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 quickly regretted the move, and last May — as Hasbro was fending off a proxy battle from activist investor Alta Fox trying to spin it off from its games division — called the timing of the studio purchase “unfortunate ”, indicating it has been overspent.

Now Hasbro is unloading eOne, revealing on November 17 that it hired bankers to investigate a sale of the studio, but keep it IP-like Peppa Pig. That’s a nod to investors who have been urging the company to sell some of eOne to reinvest in fewer, more profitable properties, doing so with third-party partners to reduce costs and risk. Wall Street analysts welcomed the move.

“It makes a lot of sense to scale down eOne, as there are a number of non-core assets within that company that don’t necessarily fit into Hasbro’s flywheel,” said Eric Handler of MKM Partners. The analyst adds that Hasbro will keep its family-owned content company and, like rival Mattel, will rely on production deals with studios and steamers and big names across Hollywood. “They just need to maintain enough infrastructure and personnel to lead Hasbro IP into successful film or TV projects,” Handler notes.

The idea of ​​becoming a Hollywood producer a la Marvel Studios was spearheaded by CEO Brian Goldner, who passed away in October 2021. His successor, Chris Cocks, is more focused on building Hasbro as a gaming powerhouse, including his lucrative Magic: The Gathering and Wizards of the Coast franchises.

Instead of going through the expensive process of producing titles, Hasbro can simply use its IP catalog for projects at Paramount, such as 2023 releases Transformers: Rise of the Beasts and Dungeons & Dragons: honor among thieves.

As Hasbro investor Fredrick DiSanto bluntly wrote in a letter to executives in May, “Hasbro does not need to own eOne to Dungeons and Dragons to the big screen, just as George RR Martin didn’t need his own production studio to bring Game of Thrones to life.”

News about a sales process is hardly unexpected. The toy giant pointed to the previous $385 million sale of eOne’s music business as “not core to our brand blueprint strategy.” And the move to divest eOne also follows division CEO Darren Throop’s announcement in August that he will be leaving the company when his contract expires at the end of 2022.

Now almost everything else in eOne also complements Hasbro’s focus on fewer, bigger brands. “This is positive because it will allow Hasbro to wind down more quickly and get rid of non-core businesses where performance is difficult to project and which are a distraction from running the strategic parts of the business (toys and tabletop and digital gaming,” 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 note from Bank of America claimed that the toy giant “destroyed the long-term value” of its Magic: The Gathering real estate by selling too many collectible cards led to a steep sell-off in the stock price.

As for the sales process, the company disclosed 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 rallied up $2.45, or just over 4 percent, to $58.42 at close of trading on Thursday.

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