Today’s announcement that Peppa Pig’s owner Entertainment One is to be acquired by US toymaker Hasbro for around £3.3bn ($4bn), was not entirely a surprise to many investors.
The media content arena has been busy with mergers and acquisitions during the past year, such as Sky being acquired by Comcast in October 2018. And UK stocks generally have been in the firing line too. Last week it was announced that British pub chain Greene King was to be acquired by Hong Kong operator CKA.
Today’s news is understandable. With an entertainment library estimated to be worth $2bn, including the long-time family favourite Peppa Pig and popular preschool show PJ Masks, eOne has great potential for further growth. Hasbro, famous for My Little Pony and Transformers, will use the deal to expand its entertainment and family-oriented storytelling portfolio.
It all makes me wonder who will be next?
Online grocery shopping
What about Ocado (LSE:OCDO) the tech play/online supermarket? US giant Amazon was rumoured to be looking at Ocado back in 2017 and takeover speculation was rife again in January 2018 suggesting Walmart was interested. In June 2018, US Supermarket giant Kroger built its stake in the firm to become the fifth largest shareholder, again igniting takeover speculation, but nothing came of it.
In February this year, Marks & Spencer (M&S) joined forces in a joint venture with Ocado to acquire a 50% stake in Ocado’s UK retail business, which will replace Waitrose with M&S ranges by September 2020. This caused Ocado shares to rise, whilst Marks & Spencer’s fell (so could M&S also be a potential takeover target? Back in 2012, it was subject to rumours that a US private equity firm was interested.)
Another reason Ocado has retained the status of a possible takeover target, is due to its unique robotic technology. The company has already amassed licensing deals around the world for its unique technology, which is thought to contribute to most of its £8bn valuation.
The joint venture with M&S should help position it even more favourably as a takeover target. It gives the group space to focus time and money on advancing its robot and warehouse technology, while its retail business is boosted by the reputation of M&S food. Tim Steiner, Ocado CEO, said: “We are delighted that our UK retail business will become a joint venture with M&S. This is a transformative moment in the UK retail sector with the combination of two iconic and much-loved retail brands set to provide an unrivalled online grocery offering.“
In its annual report ending December 2018 p, it reported widening losses, with a pre-tax loss of £44m, a staggering 388% increase of £35m from the previous year. Earnings-per-share are negative at -24.7p and it doesn’t offer a dividend. However, it wasn’t all bad news as its sales rose by 12.3% to £1.59bn.
I think Ocado is a share worth buying with an eye to its future potential, management is making sensible moves and there is plenty of scope for growth within online grocery shopping in the UK.