Mattel Acquisition of Hasbro
Presented to:
FIN5190
Presented by:
Yuan Zou
Kyle Patino
December 12, 2012
Project Overview
• Created a hypothetical acquisition scenario.
• Selected two S&P 500 companies.
• Mattel (“MAT”) as the acquirer with a market cap of 12B.
• Hasbro (“HAS”) as the acquiree with a market cap of 4.9B.
• Both companies are involved in the design, manufacturing and marketing of toys.
• Assumption is that there are synergies and cost reductions to be garnered.
• Goal is to utilize different modeling techniques to gauge the valuation and scenario
analysis to determine if the acquisition strategy should be pursued.
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Company Overviews
Mattel
•
Share Price (as of 10/2/2012)
$ 35.43
•
Market Capitalization
$ 12,077,000,000
•
Headquarters
El Segundo, California
•
Notable Brands
Mattel, Fisher Price, American Girl, Thomas &
Friends
•
Sales Distribution
76% US/Europe
Hasbro
•
Share Price (as of 10/2/2012)
$ 37.80
•
Market Capitalization
$ 4,922,700,000
•
Headquarters
Pawtucket, Rhode Island
•
Notable Brands
Transformers, My Little Pony, Play-Doh
•
Sales Distribution
38.5% North America
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Project Objectives
• Our project objectives include application of financial techniques such as the
following:
• Establish the WACC for Hasbro
• Create a proforma and enterprise value for Hasbro
• Establish a stock exchange ratio for an all-stock transaction
• Consolidate the financial statements of Hasbro and Mattel, taking into
account Goodwill accounting treatment
• Run scenario analysis of the combined entity with a base case, economic
recession and economic growth
• Run crystal ball simulation to gauge the impact on the forward looking
stock price
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Modeling Techniques
• Weighted Average Cost of Capital Calculation
• Company Valuation
• Consolidated financial statements and pro forma spreadsheet
• Crystal ball application
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Conclusion
• Based on an 8.66% WACC for Hasbro, we conclude the enterprise value net of debt
(purchase price) to be $2,984 million.
• Implied share price of $22.91 vs current share price of $37.80.
• Hasbro is overvalued.
• We assume conservative sales growth of 2%, but assume a 20% reduction in G&A
expense as the result of cost saving synergies and headcount reduction.
• Once consolidated, base case implied enterprise value is $21,022 million with an
implied share price of $41.26 (10.35% increase).
• Recession case (negative 1% sales growth), implied enterprise value is $16,652
million with an implied share price of $30.95 (17.22% decrease).
• Growth case (positive 5% sales growth), implied enterprise value is $25,914
million with an implied share price of $52.80 (41.21% increase).
• Crystal ball simulation ranges from $ 36.70 to $ 45.86 price per share.
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