Today’s big buyout news is that Providence Equity Partners approached Hasbro about a buyout, and that Hasbro said no.
Maybe the talks are really dead, or maybe we’re simply watching some pre-deal posturing. Or maybe a bit of both, and other LBO firms will soon fill the breach (given Hasbro’s $6.1b market cap, no one firm is likely to do it alone anyway).
But why media-focused Providence in the first place? After all, isn’t Hasbro known for Transformers and GI Joe? (peHUB also is intrigued and alarmed by Hasbro’s Baby Alive real surprises doll that pees and poops.)
The explanation lies in Hasbro’s plans to launch a cable TV venture this fall, called the HUB, in partnership with Discovery Communications. The channel will be aimed at children, and feature programs based on Hasbro toys. The company has invested $350 million into HUB and pledged another $125 million in product sales over the next three years, according to a WSJ report.
Margaret Whitfield, an analyst with Sterne Agee & Leach, said the HUB could be the fifth-largest kids cable show if successful. This would also translate into higher growth and income for Hasbro.
“This sounds like a really interesting and logical strategy for Hasbro to be following and one that would appeal to Providence,” another banker said.
It also doesn’t hurt that Hasbro has a strong balance sheet, with $4 billion in annual 2009 sales and $1.3 billion in cash. The only downside is $1.4 billion of debt, although that’s probably not too much for big buyouts shops to swallow.