We explore the key attractions behind the latest takeover offers
Thursday 29 Aug 2019 Author: Ian Conway

It seems as though barely a week goes by without at least one UK-listed company being taken over. The fall in the value of the pound is one factor, but buyers are also focusing on unique brands, franchises and physical assets.

Last week Entertainment One (ETO) received a £3.3bn takeover bid from US toy maker Hasbro. The target has stakes in unique, family-oriented brands such as Peppa Pig and PJ Masks which are hugely successful as far afield as the US and China.

The popularity of streaming means that video-on-demand platforms are gobbling up prime content as quickly as the producers can make it. Add in Hasbro’s potential to make and sell toys on an industrial scale and the long-term value of the brands could be many times the purchase price.

Just a few days earlier, Greene King (GNK) received a £2.7bn offer from Hong Kong-based CKA, which calls itself a ‘long-term and strategic investor in stable, profitable and cash-flow generating businesses that benefit from real estate backing.’

As well as making the fairly safe assumption that ‘pubs will continue to be an important part of British culture’, it actually specified Greene King’s freehold and long leasehold backed property estate as a main attraction. In other words, CKA is as interested – if not more so – in the assets as the business itself.

Last month, EI Group (EIG) received a £1.3bn offer from Stonegate Pub Co, backed by private equity firm TDR Capital. While TDR is based in the UK, it’s no less red in tooth and claw than any other private equity firm.

It describes its strategy as investing in companies that offer ‘significant opportunities to de-risk the investment quickly’, for example by buying companies with significant asset backing, long-term visible cash flow streams or tangible assets which it can monetise easily.

Likewise the £4.8bn bid for Merlin Entertainments (MERL) from Kirkbi, the Danish family office which owns Lego, was largely based on the underlying value of its theme park assets and a desire to maintain control over the Lego brand.

By coincidence, Merlin has an agreement with Entertainment One to open 50 Peppa Pig theme parks and opened its first Peppa Pig World of Play in the US earlier this year.

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