Earlier this year, US toy company Hasbro agreed a deal to buy Entertainment One — the company that owns Peppa Pig — for around £3.3 billion. The deal is expected to be completed by the end of 2019.

As well as Peppa Pig, Entertainment One owns popular children’s cartoon PJ Masks and TV shows like the Walking Dead. Hasbro will also gain access to Entertainment One’s significant expertise in content creation.

The deal values each of Entertainment One’s shares at £5.60, twice as high as an offer tabled by ITV in 2016, which valued the company at £2.36 per share.

There has been a recent spate of companies with links to the UK – Entertainment One is listed on the London Stock Exchange – being bought by foreign buyers. Other recent acquisitions include:

• Hong Kong-based CKA Group buying UK pub and beer company Greene King for £2.7 billion.
• Japanese drinks giant Asahi buying Fuller’s for £250 million.
• US private equity group Advent International buying aerospace and defence supplier Cobham for £4 billion.
• The family that owns Lego buying Merlin, the operator of Alton Towers, Madame Tussauds, and Legoland, for £6 billion.
• Several investment companies buying satellite communications business Inmarsat for £2.2 billion.

The Peppa Pig deal is particularly eye-catching considering that i) a media company doesn’t automatically seem like a great fit for a toy company; and ii) Entertainment One’s pre-tax profit stood at just £36.8m in the 12 months to March 2019.

What Does Hasbro See in the Brand?

The recently agreed deal isn’t the first time Peppa Pig has been involved in a takeover. When Entertainment One invested in Peppa Pig in 2015, it paid the creators, London based animation firm Astley Baker Davis, £140 million for a 70% stake. 

What is it about the world’s favourite animated pig that makes it so valuable?

Well, for Hasbro, there are a few reasons. When explaining why it went ahead with the takeover, the company released a statement in which it said that not only would it be able to add Entertainment

One’s brands to its existing portfolio, but it would also receive the company’s TV and film expertise.

Hasbro expects this to “dramatically enhance [its] storytelling capabilities”, which will allow it to strengthen its existing brands.

It seems like Hasbro has two motivations for the deal. First, it will gain access to brands like Peppa Pig, in which it can use its expertise in building toys and games to monetise further. Second, it will use Entertainment One’s knowledge to widen the appeal of its existing brands through content creation.

 How are Toy Brands Valued?

As a company that spends a lot of time trying to unearth the value of companies and businesses, it was interesting to try to see how highly Hasbro valued Peppa Pig and Entertainment One’s other assets. While we usually deal with valuing physical assets like property, a brand is much more intangible and much harder to value.

Brand Finance’s Toys 25 annual report from 2019 provides a fascinating look at what they think makes a toy brand valuable. According to the list, Lego is the most valuable toy brand, followed by Bandai Namco, Fisher-Price, Nerf, and Barbie.

This list takes into account several factors, including:

• Enterprise value: “The value of the entire enterprise, made up of multiple branded businesses.”
• Branded business value: “The value of a single branded business operating under the subject brand.”
• Brand contribution: “The overall uplift in shareholder value that the business derives from owning the brand rather than operating a generic brand.”
• Brand value: “The value of the trademark and associated marketing IP within the branded business.”

Of course, these factors should play a large part in the valuation of any brand. However, what I found interesting is some of the other brand value factors mentioned in the report’s executive summary.

It says that Lego, for example, not only has significant brand strength due to its current product range but also its reputation as an educational toy. Adults who buy the product for their children have fond memories of it from their childhood, and they think it is a good alternative to screen time.

Some of the brands on the list could face trouble ahead. Barbie’s brand value, for example, has decreased recently. Brand Finance suggested this may be due to snowballing bad press over the unrealistic appearance of the dolls and their lack of diversity.

One thing all the brands on the list have in common is that they are famous across the world. This is also true with Peppa Pig, which is hugely popular not just in English speaking countries but also in China, where it has sold more than 40 million books and racked up over 60 billion streams on Chinese platforms.

Conclusion

Putting a value on a brand can be difficult. Much of the value of the Peppa Pig deal comes not just from where the brand is now, but from the way Hasbro expects to use Entertainment One’s assets to add value to its existing brands.

At Reparo, we know that understanding the value of the companies we provide financing for is essential. While we don’t use brand value as security, we do look at a company’s overall business plan to assess how likely we think it is to succeed before making a lending decision.

To discuss a loan for your company, get in touch with one of the team on sales@reparofinance.co.uk  or 0161 451 5714.