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HIT Entertainment makes tracks to nab Thomas

In an attempt to secure its third major acquisition in two years, HIT Entertainment has confirmed its intent to purchase Thomas the Tank Engine rights owner Gullane Entertainment. If successful, the deal would create an independent kids studio valued at close to US$900 million, as well as cementing HIT's position as the leading preschool operator outside of network groupings.
June 1, 2002

In an attempt to secure its third major acquisition in two years, HIT Entertainment has confirmed its intent to purchase Thomas the Tank Engine rights owner Gullane Entertainment. If successful, the deal would create an independent kids studio valued at close to US$900 million, as well as cementing HIT’s position as the leading preschool operator outside of network groupings.

‘Having Bob the Builder, Barney and Thomas under one infrastructure makes a lot of sense. Even major properties ebb and flow over time, so to have a portfolio of them is very attractive,’ muses Entertainment Rights chief executive Mike Heap.

For their part, HIT and Gullane have acknowledged that discussions are underway, but are holding their cards close for now. ‘The Board has received an approach, which may or may not lead to an offer being made for Gullane. Discussions are at an early stage, and a further announcement will be made when appropriate,’ summed up Gullane’s statement. The official word from HIT was equally low-key: ‘HIT confirms that it has made an approach to Gullane. The majority of the consideration [will be] payable in cash funded from HIT’s bank facilities.’

At this stage, there are no obvious rivals to HIT’s bid. U.S. majors such as Disney are unlikely to become involved, companies like Entertainment Rights are too small, and a suffering stock market in Germany all but rules out a bid from that territory. The major stumbling block is whether Gullane shareholders will accept a bid that is a third less than HIT’s first purchase offer two years ago. HIT now values Gullane at US$7.25 per share (roughly US$230 million in total)–down US$3.55 from the US$10.80 per share Gullane rejected during better times.

Aside from Thomas, a successful purchase would bring established brands Sooty and Fireman Sam, as well as developing TV series Harry and a Bucketful of Dinosaurs and Yoko! Jakamoko! Toto! to the HIT fold. Since the Gullane catalog also houses older-skewing brands such as Art Attack and Guinness World Records, the acquisition could trigger HIT to broaden its demographic focus beyond the under-eight set. Alternatively, the deal may force a quick sale of Guinness World Records and Art Attack, as well as any preschool characters that CEO Rob Lawes views as surplus to requirements.

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