Investors bet on Peppa Pig bidding war after £3.3bn Hasbro offer

Shares in the owner of cartoon franchises Peppa Pig and PJ Masks on Friday soared above an agreed offer for the company by US toymaker Hasbro as investors bet that other bidders would enter the fray.

Entertainment One accepted a £3.3bn offer from Hasbro late on Thursday. But shares in the London-listed film and television production company surged as much as 39 per cent on Friday to £6.16, far surpassing the £5.60-a-share deal, before trimming their gains to £5.85.

The dramatic move in the company’s stock came as analysts and investors speculated that another buyer could emerge as consolidation grips the media world.

“Content has become a hot topic for this industry — and in Peppa Pig and PJ Masks, Entertainment One owns two of the most popular children’s programming brands,” said analysts at broker Olivetree Securities. “The market will likely focus on counterbid potential — Hasbro’s proposal should be pretty [clean] to consummate and yet many potential suitors have been linked to Entertainment One over the last few years.”

Entertainment One would be the latest UK-listed company to be acquired by a foreign buyer as a pound weakened by fears of a disorderly October Brexit make British assets cheaper.

Several high-profile companies have been targeted by overseas acquirers since the Brexit vote three years ago but there has been a new round of acquisitions since Boris Johnson’s arrival at 10 Downing Street sent sterling to its lowest level against the dollar in years.

Hasbro’s deal to buy Entertainment One ranks among the highest prices for a British-listed group this year.

It comes on the heels of this week’s £4.6bn purchase of the UK’s biggest listed pubs and brewery group Greene King by the investment firm founded by Hong Kong billionaire Li Ka-shing, the £4bn buyout of the aerospace and defence supplier Cobham by a US private equity group, and the roughly £5bn takeover of the food delivery company Just Eat by Netherlands-based Takeaway.com.

The purchase would add a slate of new brands to Hasbro’s portfolio as the toymaker known for the Monopoly board game and Play-Doh moulding clay seeks to bolster its pre-school business and expand its entertainment offerings.

Peppa Pig, which turned 15 this year, is among Entertainment One’s most prized assets. The group said the cartoon generated £90.2m in revenues in the year to March 31, up 20 per cent from a year earlier as Peppa continued to gain traction outside the UK.

Brian Goldner, Hasbro chairman and chief executive, said Entertainment One would help his company bring its portfolio of brands “to all screens globally”.

Top executives from Entertainment One are expected to join Hasbro, which hopes to cut $130m in costs from the combined group by 2022. Hasbro added that it would move a “significant portion” of Entertainment One’s toy business in-house and would attempt to bolster the profitability of its licensing and merchandising operations.

Hasbro said it would finance the all-cash transaction with new debt as well as $1bn-$1.25bn from a sale of stock in the company. Bank of America has agreed to provide a bridge loan to fund the takeover.

The US company added that it intended to maintain its quarterly dividend but would suspend share buybacks as it worked to pay off its borrowings for the deal.

Shares in Hasbro fell 7 per cent in late-morning trade on Friday to $106.82.

Courtesy : Financial Times