Hasbro, Discovery Channel Meld Minds to Create New TV Network
According to Reuters, the number two toymaker in the United States and the kids' imprint of the Discovery Channel are joining forces to create a new TV network for children.
The new network will replace the Discovery Kids network, featuring reruns of cartoons such as G.I. Joe and Transformers as well as live action programming such as Bindi the Jungle Girl.
Under the terms of the agreement, Hasbro will purchase a 50 percent stake in the venture. Discovery Kids will receive $300 million from the deal, and retain the Discovery Kids brand for its international operations as well as for merchandising purposes.
The purchase of Discovery isn't without its downsides. According to Hasbro's own estimates, it expects to take a 25 to 30 percent hit in its books for fiscal year 2009. FY 2010 isn't much better. It's expected to take a 30 to 35 percent hit between September 2009 and January 2010.
Not surprisingly, Hasbro's shareholders aren't taking the news well. As of the closing bell, the company's shares slipped 5 percent in trading on the New York Stock Exchange. In comparison, Discovery's stock slipped 0.9 percent in trading Thursday.
"You have a binary event," BMO Capital Markets analyst Gerrick Johnson said. "Either it works or it doesn't. The market is making a decision, saying, 'We don't really like it.'"
Hasbro and Discovery shares are currently trading at $27.13 and $18.96 per share, respectively.
A name for the new network will debut in 2010.