Berenberg ups Entertainment One price target, considers potential counterbid
By Michele Maatouk
Date: Monday 09 Sep 2019
(Sharecast News) - Berenberg downgraded its stance on Peppa Pig owner Entertainment One to 'hold' from 'buy' on Monday as it lifted the price target to 572p from 475p to account for a 20% chance of a potential "left field" counterbid to Hasbro at 10% above the current price.
US toy company Hasbro agreed to buy ETO for £3.3bn last month.
Berenberg said in a note that Entertainment One is a logical takeover candidate for many players.
"In a world where many deep-pocketed tech giants are working to understand how they can captivate audiences by producing the very best content, we believe Entertainment One appears quite attractive given its modest size (a library valuation of £2bn) and a diverse portfolio of children's brands, films, TV series and music.
"That said, we think there is no urgent need for any other players to own Entertainment One."
The bank said ETO can operate under the Hasbro umbrella, in the same way it did when it was independent. It said the company can continue being a platform-agnostic TV and movie producer, and create what is considered by many to be the best children's IP in the world.
"We believe that a bidding war would have been a more likely scenario if Disney or Netflix had stepped in to buy the asset. This would create the need for other SVOD (subscription video on demand) player to step in to ring fence the asset/IP.
"Not many thought of Hasbro as the logical acquirer, so we would therefore argue that there is still a chance that other left-field players could come in to buy the asset. We reflect such a possibility in our price target."
At 1050 BST, the shares were down 1.4% at 580p.
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