DreamWorks Animation Takeover? Maybe This Time It’s for Real, Analyst Says

Jeffrey Katzenberg’s studio has failed to clinch deals with past suitors, but new businesses may improve the chances of a Comcast acquisition

Last Updated: April 27, 2016 @ 3:23 PM

DreamWorks Animation takeover bids have come and gone over the years, but the animation studio’s new businesses may help Comcast’s overtures come to fruition, an analyst said Wednesday.

DreamWorks Animation’s ownership of teen digital-video darling AwesomenessTV, its strengthened consumer products and access to China make it more attractive to Comcast than past bidders like telecom giant SoftBank and toy company Hasbro, PiperJaffray analyst Michael J. Olson said.

Comcast, for its part, makes a better fit for DreamWorks Animation as well, he said in a note. DWA’ global distribution deal with 20th Century Fox expires next year and the cable giant’s own animation arm is more streamlined and nimble. Comcast could help DreamWorks to clear those two key hurdles.

“A combination in our view would team up two successful animation
studios,” he said, by joining DWA with Comcast’s Illumination Entertainment, known for the “Despicable Me” franchise.

Late Tuesday, news emerged that Comcast was in talks to acquire DreamWorks Animation in a deal worth more than $3 billion.

The new move follows a failed acquisition offer from SoftBank in 2014 and another unsuccessful merger negotiation with Hasbro a couple months later. The Wall Street Journal also reported that DreamWorks Animation more recently held takeover talks with Chinese parties, citing unnamed people familiar with the matter.

At $3 billion, Olsen calculated Comcast’s bid would equate to about $34 to $35 a share. DreamWorks Animation has sought about $38 per share in the past, suggesting the company may push for a higher offer.

In premarket trading Wednesday, DreamWorks Animation’s stock was up 18 percent to $31.96 a share. Comcast’s Class A shares traded 1.7 percent higher at $62.10.

A different analyst, FBR’s Barton Crockett, noted that DreamWork’s Animation stock has a history of popping on reports of a bid, then fading as the mergers fail to materialize. “This time, however, the report feels firmer to us, so we give it more credence,” he said.

However, Olsen noted some of the same concerns in past DWA merger talks persist this time, including reaching an agreement on price, the company’s control and volatility in DWA’s slate.

Under founding CEO Jeffrey Katzenberg, DreamWorks Animation has struggled to stabilize its growth because of a spotty release slate and mixed results at the box office. Early last year, it cut back its annual number of releases and laid off nearly 20 percent of its staff.