Hasbro slides after announcing it will buy Entertainment One, the owner of Peppa Pig, for $4 billion

Carmen ReinickeAug 23, 2019, 19:34 IST

Hasbro announced Thursday that it agreed to acquire Entertainment One, whose brands include Peppa Pig, for $4 billion.
Shares of the toymaker slid in early trading Friday.
Hasbro's largest-ever deal would expand its audience and boost earnings.
Watch Hasbro trade live on Markets Insider.

Hasbro investors aren't sure about Peppa Pig.

Shares of the largest public toymaker slid more than 7% in early trading Friday after the company announced Thursday that it would purchase Entertainment One for $4 billion. Entertainment One produces content for adults and children - its lineup includes Peppa Pig, PJ Masks, and Ricky Zoom, three popular cartoon franchises for infants and toddlers.

Entertainment One's stock price rose to as high as £5.79 in London trading, topping the £5.60 price tag that Hasbro offered and fueling speculation that another company could make a competing bid, according to Bloomberg.

If the deal goes through, it would expand Hasbro's portfolio to new, younger viewers. Other brands that Hasbro owns include Monopoly, Transformers, and My Little Pony.

"Peppa Pig, PJ Masks and other brands in development are highly profitable and merchandisable," said Brian Goldner, the CEO of Hasbro, on a call with analysts. "These brands have many of the characteristics and profitability of our franchise brands."

The acquisition could help boost Hasbro's earnings, writes Theron Mohammed of Business Insider. Entertainment One's earnings have outpaced Hasbro's in recent years - in March 2017, Entertainment One's operating income increased 14%, while Hasbro's declined in 2018.

Going forward, Entertainment One is expected to grow sales by more than 10% multiple years in a row, while Hasbro's sales growth is expected to slow. Hasbro hopes to boost its adjusted earnings-per-share by 14% to 19% after three years from the deal.

In addition to the television content, the shows owned by Entertainment One have strong brands that could generate earnings in areas from theme parks to toys and live shows, Hasbro executives said. Entertainment One also has a network of firm distributors that Hasbro will be able to take advantage of in creating new content.

Shares of Hasbro are up 35% year-to-date.