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After Hours: Hasbro Makes a $4 Billion Acquisition; Salesforce Posts Forceful Q2

By Eric Volkman – Aug 22, 2019 at 8:31PM

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Peppa Pig has a new family, while Salesforce blows past EPS forecasts.

The post-market trading scene is buzzing tonight with the news of a large-scale purchase within the entertainment and toys sectors. It's the kind of deal that leads to the question, "Would you pay $4 billion to buy the rights to an animated pig and her family?"

Money and cartoons aside, (CRM 1.76%) is trading higher on the back of encouraging quarterly results and raised guidance.

Peppa Pig blowing bubbles with brother George.

Image source: Entertainment One.

Hasbro buying Entertainment One

Adding considerably to its portfolio of intellectual property, Hasbro (HAS -2.36%) is about to swallow a big media conglomerate.

The company announced after market close that it has reached an agreement to purchase the London Stock Exchange-listed Entertainment One, or eOne, for roughly 3.3 million British pounds ($4 billion) in an all-cash transaction. Hasbro said that the price represents a 31% premium to eOne's trailing 30-day volume weighted average price.

Hasbro's asset-to-be is a sprawling entertainment purveyor based in Canada that's been in business, through various corporate incarnations, since 1970. Among its clutch of properties are the popular children's series PJ Masks and Peppa Pig.

In the press release announcing the eOne purchase, Hasbro said it "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, which will now include Hasbro's IP."

Additionally, said the company, "Hasbro will leverage eOne's immersive entertainment capabilities to bring our portfolio of brands that have appeal to gamers, fans and families to all screens globally and realize full franchise economics across our blueprint strategy for shareholders."

Hasbro said it plans to finance the deal with debt and with equity financing of around $1 billion to $1.25 billion. The company has secured a bridge loan facility with Bank of America Merrill Lynch.

In spite of the big price tag, Hasbro aims to maintain its current dividend. It will, however, freeze its share-repurchase program.

The boards of directors of both companies have approved the acquisition. The deal is subject to review from the relevant regulators and is expected to close in Q4 of this year.

Although Hasbro has been a popular stock recently, in post-market trading tonight, it seems investors aren't fully onboard with its latest move. Hasbro's stock is down by nearly 5% so far.

Salesforce Q2 trounces EPS estimates

On the back of very encouraging Q2 of fiscal 2020 results, Salesforce stock is an outperformer tonight: Its share price has risen by nearly 7%.

According to the results announcement, delivered after the closing bell, Salesforce took in $4 billion in revenue during the quarter. That was a sturdy 22% higher on a year-over-year basis, and modestly topped the average analyst estimate of $3.95 billion.

On the back of significant spending on acquisitions and other investments, non-GAAP (adjusted) net profit was $526 million, or $0.66 per share. This was slightly below the $550 million ($0.71) the company netted in the year-ago quarter. Yet it was miles ahead of the $0.47 earnings per share (EPS) anticipated by prognosticators who follow the stock.

Clearly in an optimistic frame of mind, Salesforce lifted its revenue guidance for the entirety of 2020. It now believes it will book $16.75 billion to $16.9 billion in revenue, up from the previous crystal ball read of $16.25 billion. Adjusted EPS should amount to $2.82 to $2.84.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Hasbro and The Motley Fool is short shares of Hasbro and has the following options: long January 2021 $100 calls on The Motley Fool has a disclosure policy.

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