The deal gives eOne a 70% controlling stake in ABD, which gives it control to the ultra-lucrative preschool Peppa Pig brand, taking its stake from earnings in the brand from 50% to 85%.
eOne intends to pay for the acquisition and associated expenses through an underwritten rights issue that is planned to raise £193.6 million. This means the firm will have more than £50 million to finance other acquisitions.
ABD’s financial statements will be consolidated into eOne’s following completion of the deal. eOne paid ABD royalties of £17 million for the year that ended March 31, 2015.
eOne expects Peppa’s revenues, which last year broke the US$1 billion barrier, to grow significantly by entering new markets and further expanding in the US, where the show plays on Nick Jr.
ABD made unaudited revenues of £11.12 million in the year to August 31, 2014, with profit before tax coming in at £2.56 million. The £140 million purchase price, therefore, is based on a valuation 11.6 times underlying earning before interest, tax, depreciation and amortisation.
“Peppa Pig has become a worldwide success and reflects the strength of our ten-year partnership working with ABD,” said eOne CEO Darren Throop. “Already the number one preschool property in the UK, Australia, Spain, Mexico and Brazil, and a leader in other territories around the world, the growth opportunities for Peppa Pig are significant.”
The acquisitions comes as part of eOne’s ambitious five-year plan to double its size, and follows the acquisition of a controlling stake in US drama producer The Mark Gordon Company for US$132.6 million, and deals for Canadian unscripted firms Paperny Entertainment and Force Four Entertainment. eOne also took over film distributor Alliance Atlantis in 2012.
Throop said the deal for Peppa would “create substantial value for shareholders”.
eOne, which is listed on the London Stock Exchange, said yesterday in a pre-close statement that it expects half-year financial results to be in line with management expectations, with strong television performance partially offset by weaker film performance.
The firm distributes The Walking Dead, produces procedural Rookie Blue and sells the Hunger Games movie franchise internationally.