Shares of Hasbro (NYSE: HAS) opened higher this morning, after buyout reports surfaced last night.
Private-equity firm Providence Equity Partners was reportedly in preliminary negotiations with the country's second largest toymaker, though conflicting reports this morning claim that talks broke down.
Hasbro spoke up this morning, claiming that it's not in discussions for the sale of its company. Let's hope that's true, because there's little reason for Hasbro to cash out at the time.
- The economy is showing signs of life, and greater sums of disposable income are a potent tonic for perking up the sale of playthings.
- Hasbro has been able to successfully translate its Transformers and, to a lesser extent, GI Joe toy lines into popular movie franchises.
- The toymaker has blasted past Wall Street's profit expectations in each of the past four quarters, so momentum is on its side.
- Pundits feared that video games would eat into traditional toy sales, but that industry has been in a rut for more than a year.
- A deal with Discovery Communications (Nasdaq: DISCA) (Nasdaq: DISCK) to reposition Discovery's stagnant children's channel is about to bear fruit.
A cynic can always counter that this is exactly the right time to punch out. Marvel has been even more successful in shaking its vault of character properties, and it wasn't able to resist the charms of Disney (NYSE: DIS).
I stand by my marriage objection. Hasbro is the real deal, and there is little reason to expect the company's fundamentals to be derailed in the near term. Hasbro was also able to largely avoid the toxic-paint recalls three years ago that dinged up rival brands Mattel (NYSE: MAT) and RC2 (Nasdaq: RCRC). This past weekend's successful debut of Toy Story 3 -- ripe with Hasbro stars -- should reinvigorate interest in the company's throwback toys.
I'm not naive. I realize that every company has a price, and Hasbro is no different. However, private-equity firms are historically stingy in shelling out hefty premiums. If it can't get the price it wants in a buyout, patience -- and a healthy dose of its winning ways -- will get it there eventually.
And then some.
Should Hasbro go private? Share your thoughts in the comments box below.
