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Hasbro (HAS) Completes Buyout of Saban Brands’ Power Rangers

Zacks

Hasbro, Inc. HAS, not exempting the current fate of traditional toymakers in the United States, is plagued with declining consumer demand and sales crunch. To revive its sales, the company is heavily relying on strategic partnerships and mergers.

To this end, Hasbro announced the completion of its previously declared acquisition of Saban Properties’ Power Rangers and other Entertainment Assets. By adding Power Rangers, Hasbro is trying to strengthen its footprint and reach a greater number of consumers. The first set of Power Rangers products by Hasbro will be available from spring 2019.

Details of the Deal

The merger deal was funded by a combination of cash and stock valued at $522 million. Previously, Hasbro paid $22.25 million to Saban Brands for the Power Rangers master toy license agreement that was scheduled to begin in 2019. Upon the completion of the deal, Hasbro paid $131.23 million in cash (including a $1.48 million working capital purchase price adjustment) and $25 million was placed into an escrow account. Also, an additional $75 million will be paid on Jan 3, 2019. Hasbro also issued 3,074,190 shares of common stock to Saban Properties, valued at $270 million.


Notably, the deal also enabled Hasbro acquire interests in many of Saban Properties’ entertainment assets. These assets include My Pet Monster, Popples, Julius Jr., Luna Petunia, Treehouse Detectives and others

Why Are Acquisitions the Need of the Hour?

The U.S. toy industry was dealt a heavy blow when the country’s largest independent toy seller, Toys "R" Us filed for bankruptcy last September. Adding a nail to the coffin, Toys “R” US said that it is liquidating its U.S. operations, leaving toymakers like Hasbro, Mattel MAT and JAKK Pacific JAKK in a mess as they used to derive a considerable portion of their revenues from sales to Toys "R" Us. Although retailers like Amazon AMZN had come to rescue these toymakers, they currently don’t have shelf spaces as big as Toys “R” Us, which is a concern.

Meanwhile, Hasbro has been trying to limit its dependence on Toys “R” Us since the latter’s Chapter 11 filing. It has been testing waters with new distribution methods, the development of digital-play components and exploration of ventures with other industries. The company has diverse retail channels such as drugstores and dollar chains, and big mass-market retail. It also has a robust online strategy in place that includes interactive content and virtual immersive experiences. It has a five-year agreement with Paramount to enhance storytelling and content capabilities. The company also invested in Boulder Media, its animation studio, and cultivated its digital capacities to drive sales.

The acquisition of Power Rangers from Saban Brands underscores the company’s efforts to diversify its revenues beyond retail sales. Hasbro expects these acquisitions to be profitable and offer its customers a varied product range.

Our Take

Notably, Hasbro has been one of the early movers to gauge the impact of Toys “R” Us bankruptcy amid peers. Hasbro has been adapting rapidly to changing market conditions and planning counter strategies. However, it is yet to be seen if the company’s efforts to turn around through collaborations, mergers and product innovation could shore up its flagging fortunes.


Meanwhile, shares of this Zacks Rank #5 (Strong Sell) company have underperformed the broader industry in a year’s time. While the industry rallied 20%, Hasbro’s shares have lost 16.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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