The US toy company behind My Little Pony and Play-Doh has agreed to buy Peppa Pig for £3.3bn in the the latest foreign takeover of a much-loved British brand for a bargain price following the collapse in the value of the pound over fears of a no-deal Brexit.
The sale of Peppa Pig’s owner Entertainment One to Hasbro brings the total value of UK companies to fall into overseas hands in the last two months to more than £25bn. City analysts said foreign investors were finding UK businesses very attractive since Boris Johnson’s ascension to prime minister sent sterling to its lowest level against the dollar in recent years.
“It’s pretty clear that a whole raft of London investment banks are trawling the world saying, ‘Do you want to buy this in Britain?’,” Clive Black, an analyst at broker Shore Capital, said this week.
“The foreign takeovers keep on coming,” Russ Mould, the investment director at stockbroker AJ Bell, said: “Entertainment One has been seen as a bid target for a long time although all the chatter has focused on a media company being the logical suitor.”
Hong Kong’s richest family bought the 220-year-old pub and beer company Greene King this week in a £4.6bn deal. The US private equity group Advent International agreed a £4bn buyout of the UK aerospace and defence supplier Cobham last month, and the Netherlands-based Takeaway.com agreed a £5bn takeover of Just Eat.
Merlin, which operates attractions including Alton Towers, Madame Tussauds and Legoland, was taken private for £6bn in June by a consortium including the family that controls the Lego empire. The satellite company Inmarsat was subject to a £5bn private equity-led takeover earlier in the year.
“The way sterling has weakened it is bound to be the case more overseas buyers are going to look at UK assets and find them attractive,” says Fiona Orford-Williams, a director at the analyst Edison Group. “There is a need to make sure the deals are being struck to move the larger organisation in a positive strategic direction and not just to asset strip because they are cheap.”
Linda Sullivan, a partner at Cavendish Corporate Finance, said the deal spree represented a vote of confidence in British business despite the turbulent market conditions.
“The flurry of sizeable deals means international buyers are still keen on British businesses despite the political uncertainty and Brexit,” she said. “UK businesses have always been great international traders, they are still very attractive targets and I think we will continue to see more deals.”
Other companies considered at risk of a takeover include the supermarket Morrisons, the Premier Inn owner Whitbread and ITV.
Hasbro’s deal for Entertainment One is the biggest in the toy company’s history, more than three times the amount ITV offered in an aborted takeover attempt three years ago. News of the bid sent Entertainment One’s shares soaring by almost a third.
Analysts on both sides of the Atlantic said value for money was a key factor in the timing of the takeover. “UK-listed assets such as Entertainment One are now increasingly better value and attractive to international buyers given the weakness of the pound,” said Steve Liechti, an analyst at Numis, in a note to investors titled Pigs Can Fly. “However, Hasbro clearly has some relatively unique synergies given its toy brand portfolio.”
Entertainment One, which distributes TV shows including The Walking Dead, films such as the Twilight and Hunger Games series and produces films including the Oscar winner Green Book, is valued at £2.2bn. Among its most-prized assets are its children’s brands, including the fast-growing PJ Masks and Ricky Zoom.
The crown jewel is Peppa Pig, the muddy puddle-loving pre-school character which has become a multibillion dollar global brand spanning TV, merchandise and theme parks popular from the US to China. Entertainment One struck a co-ownership deal in 2004 with the UK producer of Peppa Pig, Astley Baker Davies, and moved to take control in a £140m deal in 2015.
Hasbro’s chairman and chief executive officer, Brian Goldner, said: “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.”
Entertainment One will join a stable of products owned by Hasbro, which has a market value of more than $14bn, including Power Rangers, Transformers and Nerf.
Hasbro says it aims to cut $130m in annual costs by 2022 by moving Entertainment One’s toy business in-house and driving profitability in its licensing and merchandising operations.
“There’s a strong cultural fit between our two companies,” said Darren Throop, the chief executive of Entertainment One. “Hasbro’s portfolio of integrated toy, game and consumer products will further fuel the tremendous success we’ve achieved at eOne.”
British and UK-listed takeover targets
Target: Entertainment One
Buyer: Hasbro, US owner of toy brands from Monopoly to My Little Pony
Price: $4bn (£3.3bn)
Entertainment One was founded in Canada in 1973 as a music distributor. The London Stock Exchange listed business expanded into TV and film distribution and production, including making the Oscar winner Green Book, and took control of the production company behind Peppa Pig in 2015 for £140m
Target: Greene King
Buyer: CK Asset Holdings, the property investment firm founded by Li Kashing and run by his son Victor, who are Hong Kong’s richest family.
Price: £4.6bn
The pub and beer company traces its history back to 1799, when it was founded in the Suffolk town of Bury-St-Edmunds by 19-year-old Benjamin Greene. The business has grown to encompass 2,700 pubs, restaurants and hotels.
Target: Cobham
Buyer: US private equity group Advent International
Price: £4bn
The aerospace and defence supplier was founded as Flight Refuelling Ltd in 1934 by Sir Alan Cobham, a pilot in the first world war who became a trailblazer of long-distance flying. Cobham’s technology made air refuelling widespread and gave RAF planes the range they needed to carry out missions in the Falklands war of 1982.
Target: Just Eat
Buyer: Amsterdam-based rival Takeaway.com
Price: £5bn
The UK-listed Just Eat is one of the pioneers of the fast-growing online home delivery market, competing against rivals including Deliveroo and Uber Eat. The business was launched by five Danish entrepreneurs during the first internet boom, originally linking customers to restaurants that handled their own deliveries.
Target: Merlin Entertainments
Buyer: A consortium comprised of the Danish billionaire family that controls toymaker Lego, the US private equity group Blackstone and the Canadian pension fund CPPIB
Price: £6bn
Merlin’s roots date back to 1979, starting out with a single Sea Life centre in Oban, Scotland. Now the world’s second-biggest attractions giant, behind Disney, operating more than 130 attractions, along with hotels and holiday villages, in 27 countries. Its businesses include Madame Tussauds, the London Eye, Chessington World of Adventures, Alton Towers, Legoland, Blackpool Tower, London Dungeon and a range of Peppa Pig-themed parks through its deal with Entertainment One.
Target: Inmarsat
Buyer: A takeover group led by the private equity firms Apax and Warburg Pincus which also includes the Canadian pension fund CPPIB and Ontario Teachers’ Pension Plan Board
Price: $6bn (£5bn)
The company was set up in 1979 by the International Maritime Organization, the UN’s maritime body, as an international governmental organisation to enable ships to communicate with shore and to call for help in emergencies, which it still does today. It was privatised in 1999 and floated on the London Stock Exchange in 2005. The company has 13 satellites in orbit providing mobile satellite services that underpin email, internet and video conferencing, as well as in-flight wifi. It supplied satellite services to the Ministry of Defence to improve ground communications for soldiers fighting in Afghanistan.
