Hasbro Buys Stake in Backflip Studios - Analyst Blog

By Zacks | July 09, 2013 AAA

Toy maker Hasbro Inc. (HAS) is signing back-to-back deals with several mobile gaming companies in order to cater to the increasing demand for digital toys. Recently, Hasbro acquired a 70% stake in Boulder, Colo.-based Backflip Studios for $112 million in an all-cash deal. Hasbro anticipates the transaction to be neutral to slightly accretive to its 2013 financial results.

Founded in 2009, Backflip Studios develops some of the most sought-after mobile games including DragonVale, NinJump, Paper Toss, Ragdoll Blaster, Army of Darkness Defense and OutWorded. Backflip Studios, one of the most profitable and fast growing game studios, boasts more than 300 million downloads of its popular games. Following the acquisition, Backflip will carry on with the development of its own IP and create mobile versions of some of Hasbro’s popular brands.

The Backflip takeover is in line with Hasbro’s policy of venturing into different games and gaming formats. Hasbro has been working hard to shift its focus from traditional board games/toys to digital solutions to cope with recent trends. Actually, toy manufacturers have been negatively impacted by age “compression” as children are growing up faster with an exposure to alternative modes of entertainment including video games, MP3 players, tablets, smartphones and other electronic devices.

Earlier this month, Hasbro extended its deal with Electronic Arts Inc. (EA) to develop mobile compatible versions of some of Hasbro’s popular games like Monopoly, Scrabble, Game of Life, Battleship, Boggle, Clue, Risk and Yahtzee.

Hasbro has been highly active in signing gaming deals. Some of Hasbro’s recent associations include partnerships with Callaway Digital Arts; PopCap Games, which is an operating unit of Electronic Arts and The Tetris Company, which is one of the world’s most successful video game development companies. Apart from these, in 2012, Hasbro launched a new line of gaming products in the U.S., U.K., Australia and Canada in collaboration with the world’s largest social game developer – Zynga Inc. (ZNGA).

Hasbro currently carries a Zacks Rank #3 (Hold). One toy company that is currently performing well is Jakks Pacific Inc. (JAKK) carrying a Zacks Rank #2 (Buy).

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