Hasbro Also Reports “Solid Second Quarter”
By Gary Symons
TLL Editor in Chief
Toy giant Hasbro has agreed to sell its eOne film and TV division to Canadian film studio Lionsgate for $500 million.
The deal includes $375 million in cash, subject to certain price adjustments, as well as Lionsgate assuming all of eOne’s production financing loans.
The transaction has been approved by both companies’ Boards of Directors and remains subject to customary closing conditions, including the receipt of regulatory approvals. Hasbro intends to use the proceeds to retire a minimum of $400 million of floating rate debt by the end of the year, and for other general corporate purposes. The transaction is expected to close by the end of 2023.
For Lionsgate, a highly successful studio based in Vancouver, the acquisition brings a valuable array of assets, including eOne’s team of employees, a content library of almost 6,500 titles, and active productions for non-Hasbro brands like The Rookie, Naked and Afraid, and the breakout hit Yellowjackets.
All of those are right in Lionsgate’s wheelhouse, and it’s also fitting as eOne was originally a Canadian company before it was acquired by Hasbro in 2019.
The move is a major turnaround for Hasbro. Under the leadership of former CEO Brian Goldner, Hasbro had aggressively pursued the goal of becoming a combined toy and entertainment conglomerate.
Prior to that time, Hasbro essentially licensed their IP for use in films like the first Transformers movies or the GI Joe live actions films.
Goldner believed Hasbro’s brands were just as valuable as those owned by Marvel or DC, and so Hasbro pursued a number of potential deals with studios. The first was an investment in Discovery Communications, and Hasbro also reportedly was in talks with both Dreamworks Animation and, ironically, with Lionsgate. Those talks never bore fruit, and in 2019 Hasbro bought out the Canadian entertainment conglomerate Entertainment One, or eOne as it’s better known.
Hasbro started working on a slate of film and TV projects, some linked to their IP and some not, but just two years later, in 2021, Goldner tragically died of prostate cancer.
During this period Hasbro also went through the COVID-19 pandemic, in which it performed strongly, but also the current economic downturn, in which inflation has caused a dramatic fall in global toy sales. Like many other toymakers, Hasbro has been forced to write off a huge amount of unsold inventory, leading to a desire to streamline the operation and cut costs.
In the current meta, Hasbro CEO Chris Cocks says the goal is to work in entertainment through partnerships.
“Entertainment remains a priority for Hasbro,” Cocks insisted. “Hasbro will continue to develop and produce entertainment based on the rich vault of Hasbro-owned brands. We will also bring to life new original ideas designed to fuel all areas of Hasbro’s blueprint including toys, publishing, gaming, licensed consumer products, and location-based entertainment.
“As part of the sale, we expect to move to an asset-light model for future live action entertainment, relying on licensing and partnerships with select co-productions.”
Hasbro paid $4 billion for eOne in 2019, and since sold the music division for $375 million, but even with the $500 million from this sale, the acquisition of eOne is a money loser overall. However, Cocks said the important takeaway is that Hasbro is much better positioned for growth and profitability.
“This sale fully aligns with our strategy, and we are pleased to bring the process to a successful close,” said Cocks. “Lionsgate’s management team is experienced in entertainment and adept at driving value, and we’re glad to have found such a good home for our eOne film & TV business. We look forward to partnering with them, especially on a movie adaptation of Monopoly.”
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According to the industry publication Deadline, the sale has a lot to do with Cocks’ philosophy, which is to focus on Hasbro’s core business. Deadline’s sources say Cocks was not in line with Goldner’s vision, and saw the entertainment division as a financial drag on the overall company.
“He does not believe in Brian’s vision, or have interest in anything that doesn’t sell toys directly, said one Deadline source.
That aligns with what Hasbro has been saying to The Licensing Letter as well. In an interview at Licensing Expo this year, Hasbro VP Claire Gilchrist said Hasbro’s vision is to tightly focus on its eight top brands, and to streamline its overall operations.
“We are really going through a transformation,” Gilchrist told me, as she was flanked by gigantic Peppa Pigs and Transformer characters at the Hasbro booth. “Since the arrival of Chris Cocks as our new CEO about 14 months ago, we have undertaken a very significant, deep dive into which brands we should be focused on.
“So we’re really driving what Chris calls a ‘fewer, bigger, better’ strategy. The idea is let’s focus on the smallest set of core brands, which means we can grow them to be much bigger and better brands. And we’ve selected eight brands and we want to make all of them billion dollar US brands.”
Hasbro Reports Second Quarter Earnings Are Down, But Ahead of Expectations
As noted above, Hasbro and most other toy companies have suffered revenue declines due to inflation and low levels of consumer confidence, but the company also performed ahead of expectations in its Q2 earning report.
“The Hasbro team delivered a solid second quarter, with revenue ahead of our expectations, significant reduction of inventory, and meaningful progress toward our transformation and cost savings programs,” said Cocks. “New products are delighting our fans around the world, including the return of FURBY and the release of MAGIC: THE GATHERING’s Universes Beyond set, The Lord of the Rings: Tales of Middle-earth, which is already the second largest set in MAGIC’s history. TRANSFORMERS entertainment and innovation is driving strong growth in the brand.”
Revenue did decline 10% year-over-year (YOY), but that was better than expected given declining toy sales and the need to deal with unsold inventory.
“Through the first six months, our results have been at or above our plan,” said Gina Goetter, Hasbro chief financial officer. “Looking at our full year, our Consumer Products segment remains on track and our Wizards of the Coast and Digital Gaming segment is performing better than expected.
“Positive proof points are emerging across a variety of our transformation initiatives as we lower costs, improve productivity, and reset Hasbro for profitable growth. Selling our eOne Film and TV business will give us greater focus and financial flexibility moving forward, including paying down a minimum of $400 million in floating rate debt.”
In fact, Hasbro says it has already delivered $84 million in cost savings under its new ‘Operational Excellence Program’ in the first half of 2023, and it has reduced owned inventory level by 16%.
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