Hasbro (HAS) Shares Slide On Reports It Is Exploring A Possible Sale Of Its Entertainment Assets

4:06 pm Monday, August 22nd, 2022

According to a Bloomberg article today, toy and board game manufacturer Hasbro (HAS) is exploring a possible sale or restructuring of assets within its Entertainment business, including Entertainment One (eOne), much to investors’ disappointment. Making up just 18% of total revenue in FY21, HAS’s Entertainment segment is its most minor component of total sales. Furthermore, boasting adjusted operating margins of just under 9%, Entertainment also commands the slimmest margins.

However, Entertainment has been growing at a decent pace over the years, most recently seeing sales jump 27% yr/yr in FY21, mightily exceeding HAS’s largest segment’s (Consumer Products) only 9% growth. Additionally, HAS’s potential sale or restructuring comes just three years after it spent approximately $4.0 bln in cash for eOne in an effort to further bolster its foray into the entertainment industry. At the time, HAS expected to realize in-sourcing and other global annual run rate synergies of approximately $130 mln by 2022. In early February, HAS noted that it was on track to achieve this target.

Unfortunately for HAS, much has changed since then. In addition to CEO Brian Goldner, who was at the helm when HAS purchased eOne, passing away late last year, activist shareholder Alta Fox Capital looked to shake up HAS’s Board. Alta Fox also sent a letter to shareholders outlining the opportunity of a full or partial sale of eOne. Therefore, although investors rejected a board nominee by Alta Fox, HAS’s reported strategic review of its Entertainment division may not have come as a total surprise.

Furthermore, HAS already divested its music division housed within the Entertainment segment in April 2021. Although the company noted that music was not the primary driver of its eOne acquisition, it may have foreshadowed broader weakness within the segment. HAS is slated to host an investor day in October to provide further details on its current strategic review.