Hasbro said it has agreed to acquire eOne for about 3.3 billion pounds ($4 billion) in cash.
The deal provides for eOne shareholders receiving 5.6 pounds in cash for each share they hold in the company, which represents a 31% premium to the 30-day volume-weighted average price of eOne shares as of Aug. 22.
Entertainment One, or eOne, is an independent studio specializing in the development and distribution of entertainment content. It owns popular TV shows such as "Peppa Pig" and "PJ Masks" that are geared toward preschoolers.
Why It's Important
The acquisition is in line with Hasbro's recent strategy of acquiring children's entertainment and merchandising franchises, including superhero characters.
Hasbro said the proposed transaction will add beloved story-led global family brands capable of delivering strong operating returns to its portfolio.
"In addition, Hasbro will leverage eOne's immersive entertainment capabilities to bring our portfolio of brands that have appeal to gamers, fans and families to all screens globally and realize full franchise economics across our blueprint strategy for shareholders," CEO Brian Goldner said in a statement.
The combination of eOne's brands and TV and film expertise with Hasbro's brands and innovation in toys and games will position the company to more quickly drive revenue and profit over the medium-term, according to Hasbro.
"We remain committed to maintaining an investment-grade rating and returning to our gross debt-to-EBITDA target of 2.00 to 2.50X," Deborah Thomas, the toymaker's CFO, said in a statement.
As it strives to achieve its leverage target, Hasbro said it plans to suspend its share purchase program, although it expects to maintain its dividend.
The transaction will be financed using proceeds of debt financing and about $1 to $1.25 billion in cash from equity financing, according to Friday's announcement.
The company sees in-sourcing and other global annual run rate synergies of about $130 million by 2022, with the deal likely to add to adjusted EPS in the first year following the transaction.
Analyst: 2 Reasons For Deal
One of the strategic reasons for the deal is the acquisition of two top-tier preschool properties
as well as a rich content pipeline, SunTrust Robinson Humphrey analyst Michael Swartz said in a note.
"Secondly, eOne provides a more entrenched global production/distribution platform that should not only enable greater economics across Hasbro's own IP portfolio, but should allow it to refresh certain properties that would have been more difficult (and more costly) to do via third-parties."
The deal is expected to close in the fourth quarter of 2019, Hasbro said.
Hasbro shares were down 6.11% at $107.36 at the time of publication Friday.
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