"How Much is Hasbro?"
Recent social media chatter has brought the concept of corporate acquisitions into the public eye, with discussions of potential takeovers of major companies swirling online. Now that the idea is out there, it's worth digging into the feasibility of someone buying Hasbro, and thus Wizards of the Coast (the owners of the intellectual property of Dungeons & Dragons).This isn't the first time the future of WOTC's independence has come up. One of the concerns floated by Wizards of the Coast during the OGL controversy was that a major competitor, like Disney or Meta, could use the Open Game License to potentially create its own Dungeons & Dragons content, thereby edging Hasbro out of its own market. This precipitated the entire OGL debacle, alienating many small press publishers who used the license, as Hasbro's lawyers sought to add safeguards that prevented just such an event from happening.
It turns out buying a company isn't as simple as "paying for it."
How to Buy a Company: A Step-by-Step Guide
Hasbro is a publicly traded company. Acquiring a publicly traded company is a multifaceted process involving numerous stages and stakeholders. It’s a complex undertaking that requires careful planning, negotiation, and execution.- Initial Offer/Expression of Interest: The process typically begins with a formal offer or expression of interest made by the potential acquiring company to the target company's board of directors. This offer outlines the proposed terms of the acquisition, including the price and structure of the deal. This is a far cry from casually mentioning interest on social media.
- Due Diligence: Once an offer is made, the acquiring company conducts extensive due diligence. This involves a thorough investigation of the target company's financial records, legal standing, business operations, and potential liabilities. Teams of lawyers, accountants, and industry experts meticulously analyze every aspect of the target company to assess its true value and potential risks.
- Negotiation and Definitive Agreement: If the due diligence is satisfactory, the two companies enter into negotiations to finalize the terms of the acquisition. Once an agreement is reached, a legally binding document called a definitive agreement is signed. This is where the actual cost of acquisition comes into play. As of January 17, 2025, Hasbro's common stock was trading around $57.34 per share. With approximately 139.5 million outstanding shares, Hasbro's market capitalization sat at approximately $8 billion. A potential acquirer might consider acquiring a controlling stake (more than 50% of the shares). To do so, based on the figures above, they would need around $4 billion. However, the act of acquiring a large number of shares itself would likely drive the price up. The cost of acquiring a controlling stake would therefore be significantly higher than the simple calculation based on the current market capitalization.
- Regulatory Approvals: Depending on the size and nature of the acquisition, regulatory approvals may be required from government agencies such as the Federal Trade Commission (FTC) or the Securities and Exchange Commission (SEC). They can reject offers that they deem inadequate or not in the best interests of the company.
- Shareholder Approval: In most cases, the acquisition must be approved by the shareholders of both the acquiring company and the target company. Hasbro has the authorization to issue up to 600 million shares, and according to their latest quarterly report, they have only issued around a third of that total. This means the company can dilute ownership by issuing additional shares, making a hostile takeover even more challenging. The board of directors also plays a vital role in this process, ensuring that any deal is in the best interests of the shareholders.
Very Different Companies
The most recent parallel to a company swooping in and purchasing another is Elon Musk's acquisition of Twitter by X Corp, but there's some significant financial differences between Twitter and Hasbro.While the sheer price tag of the Twitter acquisition ($44 billion) dwarfs Hasbro's current market capitalization (around $8 billion), this doesn't automatically make Hasbro an easier target. Hasbro is a well-established company with diverse revenue streams derived from toys, games, and entertainment. This diversification provides a buffer against market fluctuations—a stark contrast to Twitter's pre-acquisition reliance on advertising revenue and struggles with profitability. This stability makes Hasbro a less risky investment from a lender's perspective, making it much harder to secure the massive debt needed for a leveraged buyout, a key tactic used in the Twitter acquisition.
Unlike Twitter, Hasbro possesses significant tangible assets, including physical inventory, manufacturing facilities, and valuable intellectual property like Dungeons & Dragons and Magic: The Gathering. These tangible assets can be used as collateral for loans, making traditional financing options more readily available. Twitter's assets, on the other hand, were primarily intangible, consisting of brand recognition, user base, and technology—assets that are harder to value and less appealing as collateral for lenders.
Hasbro's shareholder base is markedly different from Twitter's too. Hasbro boasts a diverse mix of shareholders, including institutional investors who typically hold shares for longer periods and are less likely to be swayed by short-term gains. This contrasts with Twitter's shareholder base, which was likely more focused on immediate returns and thus more receptive to a high buyout offer. Securing the necessary shareholder approval for a Hasbro acquisition would likely be a lot harder.
And Yet..
Twitter was vulnerable to a takeover because the company wasn't performing (and is still not performing to this day). If Hasbro's stock underperforms long enough for the company to consider a buyout, competitors like Musk, Disney, or Meta could make a play. Even then, it’s not a simple matter of having the money; it requires careful planning, negotiation, and execution. There's also the fact that Twitter lost 55% of its value (from its $44 billion purchase price down to its one year anniversary at $19 billion) after X Corp acquired it, making the appettite for another acquisition like this unlikely.All that said, it's worth noting that, just like his inquiry into Hasbo, Musk's journey into acquiring Twitter began with four chilling words: "How much is it?"
