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Hasbro Inc. has reached an agreement to sell its eOne film and TV business to Lionsgate, the Canadian-American media company.
Lionsgate will pay around $500 million. That includes $375 million in cash and the assumption of production loans.
Pawtucket-based Hasbro (NASDAQ:HAS) will use $400 million to pay down floating-rate debt, and the rest for other corporate purposes. The transaction is expected to close by the end of 2023, the company said Thursday.
The sale represents “a significant milestone” for Hasbro as it implements its new capital allocation strategy called Blueprint 2.0, said CEO Chris Cocks, who took the helm at Hasbro in January 2022.
The announcement follows a nine-month process. Hasbro's board in November authorized the partial sale of Entertainment One while retaining Hasbro-linked intellectual property. The eOne asset was acquired in 2019 for for $4 billion in cash in a leveraged deal.
The eOne holding has long been the target of criticism. For instance, during last year's heated proxy battle, Ancora Holdings Group LLC called the eOne division a “black hole” that offers "perverse incentives" to put good money after bad.
The eOne studio performed poorly in 2022 with a 17% full-year earnings drop to land at $959 million. The segment was down 12% even when excluding $65 million garnered from the sale of eOne's music business in 2021.
By jettisoning eOne, Hasbro is not getting out of the entertainment business, Cox said during Thursday's Q2 earnings call. He said the company will shift to an "asset-light" approach that leans upon licensing Hasbro intellectual property and leveraging production partnerships instead.
“Entertainment remains a priority for Hasbro. Hasbro will continue to develop and produce entertainment based on the rich vault of Hasbro-owned brands,” the CEO said.
Cox said moving forward, Hasbro will focus upon growth areas. Under his Blueprint 2.0 strategy, the company is reallocating capital to its most profitable brands with a focus on gaming, direct to consumer, franchise brands and licensing.
Hasbro's move to unload its entertainment studio comes during a period of change. Darren Throop, longtime president and CEO of eOne, stepped down at the end of 2022. Former chief financial officer Deb Thomas retired and was succeeded by Gina Goetter, a former Harley-Davidson executive. Two long-tenured board members recently retired. Former COO Eric Nyman departed this year as the company weathered several disappointing quarters and shed 15% of its workforce.
"We are focused on implementing transformational changes aimed at substantially reducing costs and increasing our growth rates and profitability,” said Cocks in January.
Lions Gate Entertainment Corp., founded in 1997 in Vancouver, British Columbia, is headquartered in Santa Monica, California. Among other things, it’s the home of TV hits Nurse Jackie, Weeds, and Madmen.
The eOne sale includes a team of employees, a content library of nearly 6,500 titles, and active productions for non-Hasbro IP such as The Rookie, Yellowjackets and Naked and Afraid franchises. It includes the eOne unscripted TV business and Hasbro’s interest in Entertainment One Canada.
Hasbro will retain a business and creative team to shepherd Hasbro-IP entertainment projects, including the Transformers and GI Joe franchises, Play-doh, Dungeons & Dragons, and Magic:The Gathering, Hasbro will keep animation efforts for Peppa Pig, Transformers: EarthSpark, and My Little Pony.
“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.”
JPMorgan and Centerview Partners served as lead financial advisors to Hasbro in the transaction.
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