Shares of toy maker Hasbro Inc. (HAS) rose in pre-market trading Thursday after The Wall Street Journal reported preliminary talks with private-equity firm Providence Equity Partners to take the company private in leveraged buyout.

The Journal, citing people familiar with the matter, said the status of the talks was unclear, adding that discussions had advanced over several weeks but could have come to a temporary halt given uncertainty in the markets.

But Wedbush Securities called reports of buyout talks credible and boosted its Hasbro price target to $52 from $46. Credit-ratings firm Egan-Jones, too, called a buyout "feasible."

Wells Fargo Securities said an LBO for Hasbro doesn't look likely, estimating a deal would have to be priced at about $48.60 a share, or $7.2 billion.

In any case, the news could spark a rethinking of valuations for toy stocks generally, Wedbush analyst Chris White told clients in a note.

"We have long argued that toy stocks were inexpensive, likely owing to modest secular growth prospects and low barriers to entry, but these alleged discussions surrounding Hasbro may be the catalysts to richer industry valuations," White said.

Hasbro shares recently rose 9.8% to $45.25 in pre-market trading. The previous 52-week high was $43.39. Shares of Mattel Inc. (MAT), the world's largest toy maker, rose 2.7% to $22.95 in pre-market trading.

Hasbro has a market capitalization of about $6 billion. A leveraged buyout of Hasbro, an S&P 500 company that owns the G.I. Joe, Transformers and Nerf brands, would mark the year's largest private-equity deal.

Wedbush Securities said investor attention could turn quickly to Hasbro's only large competitor, Mattel, as a potential takeover candidate, though Mattel's size makes a deal less likely. Mattel's market capitalization at Wednesday's closing prices was about 34% larger than Hasbro's.

"However, Mattel currently sports the cleanest balance sheet it has had in years, which might invite a financial sponsor (or group of them) to consider a highly-levered deal, should financing be available," White said. "But regardless of whether a deal for Mattel ever materializes, a higher valuation for Mattel shares seems plausible."

Hasbro shares have been trading near an all-time high and have the highest valuation in the toy space, with a price-to-earnings multiple of about 12.5 times the firm's 2011 earnings forecast and trading at 7 times enterprise value to EBITDA, or earnings before interest, taxes, depreciation and amortization.

Providence Equity focuses mainly on media, entertainment and communications investments, managing over $22 billion. The firm recently sold one of its portfolio companies, cable operator Bresnan Communications, to Cablevision Systems Corp for $1.37 billion. The firm is based in Providence, R.I., just a few miles from Hasbro's headquarters in Pawtucket.

Hasbro struggled earlier last decade but has had strong performance recently with per share earnings rising 30% a year in three of the past four years. Much of that gain came from Hasbro's effort to link its toys with movies.

Hasbro's chief executive, Brian Goldner, persuaded Hollywood to take a gamble on turning the company's Transformers line of toys into a movie. The gamble paid off big time, with the movie and the sequel grossing over $1 billion dollars. The movies' success helped spurred toy sales from $100 million a year to between $400 million and $600 million. Hasbro now has its own office on the Universal lot, a studio in Hollywood and more than 10 films in the works with different movie studios.

Hasbro in recent years has focused on building a multimedia presence around its toy brands, partnering with Discovery Communications (DISCA,DISCB) on The Hub, a cable channel that will feature programs based on toys such as G.I. Joe. Hasbro sank $350 million into the joint venture with Discovery and pledged an additional $125 million in product sales over the next three years.

Hasbro had more than $4 billion in annual 2009 sales and $1.4 billion in long-term debt.

Last month, Toys 'R Us Inc. announced plans to raise $800 million through an initial public offering. The company was taken private in 2005 by a group of private-equity firms including Bain Capital Partners, Kohlberg Kravis Roberts & Co. and Vornado Realty Trust.

 
 (Anupreeta Das, Gina Chon and Ann Zimmerman contributed to this report.) 
 

-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; maryellen.lloyd@dowjones.com