Hasbro is on the verge of selling the majority of its Entertainment One (eOne) assets less than five years after its US$3.8 billion acquisition, putting into question what will happen to its Canadian operations.

The Rhode Island-based toyco announced its plan to sell eOne’s film and television assets, as well as its interest in the Canadian operations, last November, to focus on its core brands, while maintaining ownership of franchises such as Peppa Pig and My Little Pony. CEO Chris Cocks told investors at the time that Hasbro had received interest from several parties to buy the assets.

Lionsgate is currently in “pole position” in the sale, which was first reported by Deadline earlier this week, and was confirmed to Playback Daily by a source with knowledge of the transaction. Former eOne president and CEO Darren Throop, and Legendary Entertainment with investment firm Apollo, are also in the running.

An update on the sale is expected within the next few weeks, Playback understands. The impact on Canada? Well, that may vary, depending on the buyer.

Stephen Selznick, a partner at Canadian law firm Cassels Brock & Blackwell, tells Playback that the value of the Canadian production operations “pales by comparison” to the value of eOne’s film and TV library, which includes Showtime’s Yellowjackets and ABC’s The Rookie.

Hasbro had already divested its ownership of eOne’s other businesses, including its music division and immersive studio Secret Location. The company confirmed Thursday (July 20) that eOne would end theatrical distribution in the U.K., and had previously closed its theatrical distribution work in Canada and Spain.

The toyco has also laid off an estimated 20% of eOne’s film and TV teams as part of larger cuts within the company, which Playback understands impacted some positions in Canada. However, a significant portion of eOne staff remain employed in Canada.

“I can see an international buyer agreeing to buy the whole thing and then selling off their control of that Canadian subsidiary to Canadians, because there’s nobody else who’s really going to benefit from owning a Canadian-controlled production company other than Canadians,” says Selznick, noting that an international owner wouldn’t be able to take advantage of the domestic tax credits. The studio’s recent Canadian-owned productions include CTV’s The Spencer Sisters (pictured) and Crave original docuseries Thunder Bay.

Hasbro’s acquisition of eOne included the acquisition of all “non-voting equity shares and preferred shares” of eOne Canada, according to its 2019 annual report. The company owns 25% of voting shares, with the remaining 75% “held by independent shareholders” to maintain its Canadian status.

Selznick says an international buyer will also need to obtain a series of approvals in Canada to finalize the transaction, including from Canadian Heritage, Investment Canada and the Competition Bureau. He adds that he doesn’t anticipate the approvals serving as a significant hurdle, as eOne would be changing hands from one foreign owner to another. However, a source has told Playback that the additional approvals will likely be a concern for any non-Canadian buyers.

“I’m not sure it changes the lay of the land here unless another Canadian [company] is buying them and then consolidating the industry into fewer competitors,” he says.

One significant factor in play is Throop’s role as a potential buyer, who Selznick speculates could be a strong contender to acquire eOne’s Canadian operations from an international buyer.

“That company [eOne] grew through a series of acquisitions in times where the economy was expansive, and that was great. It’s not really that expansive today, but there are opportunities for someone who is well-connected to take over … and then build it up to do service work to get cash flow going in order to expand into bigger markets,” says Selznick.

Hasbro and Lionsgate declined to comment, and Throop and Legendary did not respond to requests for comment as of press time.

Image courtesy of CTV