Salomon Smith Barney comments.
Hasbro: Acquisition of Tiger Electronics Offers Complementary Strategic Fit
Jill Krutick; Shao Wang
February 09, 1998
--SUMMARY:--Hasbro Inc.--Entertainment & Leisure
* This morning, Hasbro announced its intention to acquire the operating assets of privately-held Tiger Electronics, a leader in the hand held electronic toy category, for $335 million in cash. * The company's popular products include electronic versions of Wheel of Fortune and Jeopardy, Giga Pets, Game.com, Laser Tag and Brain Warp. * We view the transaction as a strong complement to Hasbro's existing businesses and its budding presence in the hand held games and interactive segment, which remain the primary growth area in the toy industry. * Tiger Electronics, which posted sales of $400 million last year, should be EPS neutral to Hasbro in year one, and accretive going forward, although assumed goodwill currently remains undetermined. * Key areas of opportunity for HAS include international expansion of Tiger's product lines, which currently experiences only 10% international penetration.
* In addition, we expect cost savings to play a role, particularly in leveraging advertising expense.
* Deal is expected to close early in the second quarter.
* We view the acquisition as a positive for Hasbro and believe that Tiger Electronics offers a strong strategic fit, allowing Hasbro to jumpstart its presence in the key electronic hand held/interactive toy segment. We expect Hasbro's stock to react positively to the news and we reiterate our 2M (Outperform, Medium Risk) rating on Hasbro. We maintain our high-$30s price target, which assumes a 10% discount to the market multiple applied to our 1998 estimate of $2.05. |
