Hasbro Puts EOne TV and Film Business on the Block to Focus on Core Competencies; Shares Attractive

Narrow-moat Hasbro disclosed its intent to put the acquired TV and film business from Entertainment One up for sale. While there are no specifically interested parties disclosed, we believe the carve out could fetch $800 million for Hasbro, given sales attributable to the segment should generate less than $1 billion in 2022 with a low-teens EBITDA margin. Admittedly, this would be contingent on Hasbro selling the business at around an 8 times EBITDA multiple, which could be tricky if capital market conditions become less favorable. But even a 5 times EBITDA multiple would represent $550 million in cash, helping Hasbro facilitate a faster path to its leverage target (gross debt/EBITDA of 2-2.5 times from around 3 at year-end). In retrospect, with the prior sale of the music business (for $385 million in 2021) and the divestiture of the TV and film assets, the EOne transaction was largely a noisy and expensive acquisition to bolt on additional family brands like Peppa Pig and PJ Masks. We think the sale offers solid strategic direction and maintain our Standard capital allocation rating.