TIDMETO
RNS Number : 0008K
Entertainment One Ltd
23 August 2019
Hasbro to Acquire Entertainment One
Adding Brands & Expanding Storytelling Through Global
Entertainment
-- Accelerates Hasbro's Brand Blueprint strategy by adding eOne's
family brands, exceptional, proven TV and film expertise
and veteran executive leadership
-- Adds beloved global preschool brands, Peppa Pig and PJ Masks,
as well as a slate of additional brands in development, including
newly introduced Ricky Zoom, to Hasbro's robust brand portfolio
-- Dramatically enhances storytelling capabilities and franchise
economics in TV, film and other mediums to strengthen Hasbro's
brands
-- Improves Hasbro's growth outlook and enhances long-term profitability
through in-sourcing and cost synergies as well as future
revenue growth opportunities
PAWTUCKET, R.I. & LONDON, ENGLAND - Hasbro, Inc. (NASDAQ:
HAS) and Entertainment One Ltd. (LSE: ETO) (eOne) today announced
that they have entered into a definitive agreement under which
Hasbro will acquire eOne in an all-cash transaction valued at
approximately GBP3.3 billion or US$4.0 billion. Under the terms of
the agreement, eOne shareholders will receive GBP5.60 in cash for
each common share of eOne, which represents a 31% premium to eOne's
30-day volume weighted average price (VWAP) as of August 22,
2019.
"The acquisition of eOne adds beloved story-led global family
brands that deliver strong operating returns to Hasbro's portfolio
and provides a pipeline of new brand creation driven by
family-oriented storytelling, which will now include Hasbro's IP,"
said Brian Goldner, Hasbro chairman and chief executive officer.
"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.
We are excited to welcome eOne's talented employees from around the
world into the Hasbro family."
"On behalf of the board of eOne, I am very pleased by this
exciting development, which is a testament to eOne management's
vision, leadership and solid execution. This transaction creates
significant, immediate value for our shareholders as it recognizes
the strength of our future-facing business model," said Allan
Leighton, eOne's chairman of the board.
"Hasbro's portfolio of integrated toy, game and consumer
products, will further fuel the tremendous success we've achieved
at eOne," said Darren Throop, chief executive officer of eOne.
"There's a strong cultural fit between our two companies; eOne's
stated mission is to unlock the power and value of creativity which
aligns with Hasbro's corporate objectives. eOne teams will continue
to do what they do best, bolstered by the access to Hasbro's
extensive portfolio of richly creative IP and merchandising
strength. In addition, the resulting expanded Hasbro presence in
Canada through eOne's deep roots will bring world class talent and
production capabilities to Hasbro. Along with our leadership team,
I look forward to working with Hasbro on our joint growth and
success for many years to come."
"By combining two profitable and financially disciplined
companies we expect to unlock value in the short- and long-term for
our stakeholders," said Deborah Thomas, Hasbro's chief financial
officer. "eOne's brands and TV and film expertise, together with
Hasbro's brands, toy and game innovation and licensing
capabilities, positions us to more quickly drive revenue and profit
over the medium-term. We remain committed to maintaining an
investment grade rating and returning to our gross Debt to EBITDA
target of 2.00 to 2.50X."
The acquisition will advance Hasbro's position as a leading
global play and entertainment company, adding beloved, global
preschool brands with proven success and strong financial returns
across platforms to Hasbro's robust portfolio. eOne's capabilities
to bring high-quality content across platforms will strengthen
Hasbro's end-to-end ability to monetize and bring to market its IP
in increasingly attractive new formats, including over-the-top
(OTT) and premium platforms, music, location-based entertainment,
AR and VR.
Strategic Rationale
Enhances Hasbro's brand portfolio with two beloved global
preschool brands and an attractive slate of brands in
development
-- The acquisition of highly profitable and merchandisable
preschool brands is a strategic growth opportunity for
Hasbro in the Infant and Preschool category, the largest
super-category in the toy and game industry in the G11
markets, according to the NPD Group
-- Peppa Pig is an evergreen property that has thrived for
over a decade and extended itself to new profit streams
that continue its success
-- PJ Masks growth outlook is supported by new formats, its
current rollout in China, the launch of new seasons in
multiple regions, a live touring event and new toy lines
-- A slate of additional brands is under development, including
Ricky Zoom, a unique storyline with highly merchandisable
content airing on Nickelodeon in the US and other top-tier
global networks beginning Sept. 9, 2019
Adding exceptional, proven TV and film expertise
-- By developing, owning and strategically distributing content,
the acquisition positions Hasbro to capture more franchise
economics created and perpetuated by differentiated platforms
-- eOne brings profitable, growing capabilities in scripted
and unscripted TV development and production for global
audiences
-- Live action and animation present multiple avenues to
bring Hasbro's franchises to life as OTT platforms and
networks are increasingly interested in new, unexploited
intellectual property while studios reclaim content for
proprietary platforms
-- In film, eOne has been transforming its business to focus
on high-quality premium talent-driven content, including
titles like Clifford the Big Red Dog and Monster Problems
-- eOne's Canadian TV and film operations will continue as
a distinct Canadian-controlled business within the combined
business
Leveraging talented executive team across all areas of
entertainment and strong Canadian presence
-- Top eOne executives have agreed to join the Hasbro team
-- eOne's seasoned entertainment executives with deep talent
relationships and creative drive will further strengthen
Hasbro's talented team
-- Global organization, with presence in London, Los Angeles,
Toronto, New York, Hong Kong, Melbourne and Shanghai
-- eOne's Canadian presence is an important base for creative
talent and best-in-class studio capabilities, significantly
expanding Hasbro's Canadian presence and positioning eOne
for ongoing success in Canada, including in relation to
its robust pipeline of television and film projects
-- The transaction is structured to ensure that eOne's Canadian
operations will continue to meet applicable Canadian control
regulatory requirements in relation to television and
film production companies, to the continued benefit of
the Canadian television and film production industry
Financial Benefits
Creates opportunities for accelerating long-term profitable
growth
-- Hasbro expects to realize in-sourcing and other global
annual run rate synergies of approximately US$130 million
by 2022, driven by integration benefits, substantial savings
from moving a significant portion of eOne's toy business
in-house and enhancing the profitability of eOne's licensing
and merchandising activities
-- The addition of eOne to Hasbro is expected to be accretive
to adjusted EPS in the first year following the transaction,
adjusted to exclude one-time transaction costs and purchased
intangible amortization, with mid- to high-teens accretion
to adjusted EPS in the third full year following the closing
of the transaction as synergies are achieved (1)
-- Meaningful potential for additional revenue growth and
expanded franchise economics with brand-driven animation
and live action TV and film entertainment
(1) Hasbro cannot, without unreasonable effort, forecast certain
items required to develop a meaningful comparable GAAP
financial measure to adjusted EPS. See "Use of non-GAAP
financial measures" below for further discussion
Transaction Details
The cash purchase price of GBP5.60 per share represents a 31%
premium to eOne's 30-day volume weighted average price (VWAP) as of
August 22, 2019.
Hasbro expects to finance the transaction with the proceeds of
debt financing and approximately US$1.0 billion to US$1.25 billion
in cash from equity financing. Hasbro has entered into a debt
commitment letter with Bank of America Merrill Lynch to provide a
364-day senior unsecured bridge loan facility to secure funding of
the purchase price.
Hasbro is committed to maintaining an investment grade rating.
Hasbro's long-term leverage target remains unchanged at 2.00 to
2.50X gross Debt to EBITDA and expects to return to this range in
three to four years.
Hasbro expects to maintain its quarterly dividend and suspend
its current share repurchase program while it prioritizes achieving
its leverage target.
The transaction, which is structured as a statutory plan of
arrangement under the Canada Business Corporations Act, has been
approved by the boards of directors of each of Hasbro and eOne, and
is subject to receipt of certain regulatory approvals, the approval
by eOne shareholders and the Ontario Superior Court of Justice and
other customary closing conditions. eOne is subject to customary
non-solicitation provisions under the definitive agreement and a
termination fee payable to Hasbro in certain circumstances. The
transaction is expected to close during the fourth quarter of
2019.
The board of directors of eOne, after consultation with its
financial advisors as to the financial terms of the transaction and
its legal advisors, unanimously determined that the transaction is
in the best interests of eOne and has recommended that eOne
shareholders vote in favor of the transaction. eOne's board of
directors has received a fairness opinion from J.P. Morgan Cazenove
in connection with the transaction to the effect that, as of the
date of such opinion, and subject to the assumptions, limitations,
qualifications and other matters set forth therein, the
consideration to be paid to the eOne shareholders is fair, from a
financial point of view, to such shareholders.
Centerview Partners LLC is serving as financial advisor to
Hasbro and Cravath, Swaine & Moore LLP, Stikeman Elliott LLP
and Freshfields Bruckhaus Deringer LLP are serving as its legal
counsel. J.P. Morgan Cazenove is serving as financial advisor to
eOne and Osler, Hoskin & Harcourt LLP and Mayer Brown
International LLP are serving as its legal counsel.
A copy of the definitive agreement will be made available at
eOne's website at www.entertainmentone.com and with Hasbro's
filings with the US Securities and Exchange Commission.
Webcast of Investor Call
A replay of the investor conference call hosted by the two
companies on 22 August, and the accompanying presentation slides,
are available on Hasbro's web site: https://investor.hasbro.com
About Hasbro
Hasbro (NASDAQ: HAS) is a global play and entertainment company
committed to Creating the World's Best Play Experiences. From toys
and games to television, movies, digital gaming and consumer
products, Hasbro offers a variety of ways for audiences to
experience its iconic brands, including NERF, MY LITTLE PONY,
TRANSFORMERS, PLAY-DOH, MONOPOLY, BABY ALIVE, MAGIC: THE GATHERING
and POWER RANGERS, as well as premier partner brands. Through its
entertainment labels, Allspark Pictures and Allspark Animation,
Hasbro is building its brands globally through great storytelling
and content on all screens. Hasbro is committed to making the world
a better place for children and their families through corporate
social responsibility and philanthropy. Hasbro ranked No. 13 on the
2019 100 Best Corporate Citizens list by CR Magazine, and has been
named one of the World's Most Ethical Companies(R) by Ethisphere
Institute for the past eight years. Learn more at www.hasbro.com,
and follow us on Twitter (@Hasbro) and Instagram (@Hasbro).
About Entertainment One
Entertainment One Ltd. (LSE: ETO) is a global independent studio
that specialises in the development, acquisition, production,
financing, distribution and sales of entertainment content.
Entertainment One's diversified expertise spans across film,
television and music production and sales, family programming,
merchandising and licensing, and digital content. Through its
global reach and expansive scale, powered by deep local market
knowledge, Entertainment One delivers the best content to the
world.
Entertainment One's robust network includes international
feature film distribution company Sierra/Affinity; Amblin Partners
with DreamWorks Studios, Participant Media, and Reliance
Entertainment; Makeready with Brad Weston; unscripted television
production companies Whizz Kid Entertainment and Renegade 83; live
entertainment leaders Round Room Entertainment; world-class music
labels Dualtone Music Group and Last Gang; and award-winning
emerging content and technology studio Secret Location.
IMPORTANT NOTICE:
Not for release, publication or distribution in, into or from
any jurisdiction where to do so would constitute a violation of the
relevant laws or regulations of such jurisdiction.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of MAR)
prior to its release as part of this announcement. The person
responsible for arranging release of this information on behalf of
Entertainment One is Edward Parry.
The UK City Code on Takeovers and Mergers does not apply to
Entertainment One as its registered office is in Canada.
Forward-Looking Statements
Certain statements in this press release contain
"forward-looking statements" with respect to both Hasbro and
Entertainment One within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may
be accompanied by such words as "anticipate," "believe," "could,"
"estimate," "expect," "forecast," "intend," "may," "plan,"
"potential," "project," "target," "will" and other words and terms
of similar meaning. Among other things, these forward-looking
statements include expectations concerning the proposed acquisition
of Entertainment One by Hasbro; Hasbro's beliefs relating to value
creation as a result of the proposed acquisition; the expected
timetable for completing the acquisition; benefits and synergies of
the transaction; expected financial impact; dividend policy; future
opportunities for the combined company; and de-leveraging plans,
including the timing of actions to reduce indebtedness and Hasbro's
credit ratings and outlooks. Hasbro's actual actions or results may
differ materially from those expected or anticipated in the
forward-looking statements due to both known and unknown risks and
uncertainties. Specific factors that might cause such a difference
include, but are not limited to: uncertainty as to whether the
transaction will be completed in a timely manner or at all; the
conditions precedent to completion of the transaction, including
the approval of Entertainment One's shareholders and the ability to
secure applicable regulatory approvals in a timely manner or at all
or on expected terms; uncertainty of whether Hasbro could achieve
the expected benefits and synergies from the transaction and
successfully integrate the operations of Entertainment One within
the anticipated time frame or at all; risks of unexpected costs,
liabilities or delays; integration difficulties, including the
ability to retain key personnel; Hasbro's ability to complete
financings on satisfactory terms; Hasbro's indebtedness, including
the additional indebtedness that may be incurred in connection with
the transaction; risks and uncertainties relating to the play and
entertainment industries, including the retail
landscape, distribution channels, consumer preferences,
application of tariffs on Hasbro's products, and other factors that
may impact or alter Hasbro's anticipated business plans, strategies
and objectives; the effect of the announcement, pendency or
consummation of the transaction on customers, employees, suppliers,
partners and operating results; and other risks detailed from time
to time in Hasbro's filings with the US Securities and Exchange
Commission (the "SEC"). The statements contained herein are based
on Hasbro's and Entertainment One's current beliefs and
expectations and speak only as of the date of this press release.
Except as may be required by law, neither Hasbro nor Entertainment
One undertakes any obligation to make any revisions to the
forward-looking statements contained in this press release or to
update them to reflect events or circumstances occurring after the
date of this press release. You should not place undue reliance on
forward-looking statements.
No profit forecasts or estimates
No statement in this press release is intended to be or is to be
construed as a profit forecast or profit estimate.
No offer or solicitation
This press release is provided for informational purposes only
and does not constitute an offer to sell, or an invitation to
subscribe for, purchase or exchange, any securities or the
solicitation of any vote or approval in any jurisdiction, nor shall
there be any sale, issuance, exchange or transfer of the securities
referred to in this press release in any jurisdiction in
contravention of applicable law.
Use of Non-GAAP financial measures
Within this press release, Hasbro includes certain
forward-looking non-GAAP financial measures as defined under SEC
rules. These forward-looking non-GAAP financial measures reflect
management's current expectations and beliefs regarding the
potential benefits of the proposed transaction. Hasbro is not able
to reconcile forward-looking non-GAAP measures to reported measures
without unreasonable efforts because it is not possible to predict
with a reasonable degree of certainty the actual impact or exact
timing of items that may impact comparability. These items include
business optimization, restructuring and foreign exchange rate
changes, as well as other non-cash and unusual items that are
difficult to predict in advance to include in a GAAP estimate. This
is due to the unpredictable and uncontrollable nature of these
reconciling items, which would require an unreasonable effort to
forecast, and we believe would result in a range of projected
values so broad as to be meaningless to investors. These non-GAAP
measures should be considered in addition to, not as a substitute
for, or superior to, net earnings or other measures of financial
performance prepared in accordance with GAAP as more fully
discussed in Hasbro financial statements and filings with the SEC.
As used herein, "GAAP" refers to accounting principles generally
accepted in the United States of America.
Disclaimer
J.P. Morgan Securities plc (which conducts its UK investment
banking business as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove")
which is authorised in the United Kingdom by the Prudential
Regulation Authority ("PRA") and regulated in the United Kingdom by
the PRA and the Financial Conduct Authority, is acting as financial
adviser exclusively for eOne and no one else in connection with the
matters set out in this announcement and will not regard any other
person as its client in relation to the matters set out in this
announcement and will not be responsible to anyone other than eOne
for providing the protections afforded to clients of J.P. Morgan
Cazenove or its affiliates, nor for providing advice in relation to
any matter referred to herein.
Hasbro Press and Investor Contacts
Investor Contact:
Debbie Hancock
Hasbro, Inc.
(401) 727-5401
debbie.hancock@hasbro.com
Press Contact:
Julie Duffy
Hasbro, Inc.
(401) 727-5931
julie.duffy@hasbro.com
eOne Press and Investor Contacts
Investor Contact:
Patrick Yau
Entertainment One Ltd.
+44 203 714 7931
pyau@entonegroup.com
Hugo Baring, Virginia Khoo, Micol Martinelli, Henry Capper
J.P. Morgan Cazenove
+44 207 742 4000
Press Contact:
Rebecca Sanders-Hewett
Alma PR
+44 7961 075 844
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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(END) Dow Jones Newswires
August 23, 2019 02:00 ET (06:00 GMT)
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