Report: Comcast in Talks to Buy DreamWorks Animation for $3B

Deal would bolster Universal's animation lineup
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Comcast, a little more than a year after abandoning its purchase of Time Warner Cable, has apparently turned its sights to programming, and is reportedly in talks to purchase DreamWorks Animation for more than $3 billion, according to a report in The Wall Street Journal.

The Journal offered few details, but noted that talks could break down at any point. The purchase price would be a healthy premium to DreamWorks Animation’s current $2.3 billion market value.

Investors were pleased with the news – DreamWorks Animation stock was up about 18 % ($5.03 each) in early trading Wednesday, to $32.15 per share.

DreamWorks Animation is headed by former Disney executive Jeffrey Katzenberg and has had box office hits like Madagascar, Shrek, How to Train Your Dragon and Kung Fu Panda. On television, the studio produces animated programming for Netflix like Turbo, Dawn of the Croods and DinoTrux.

Comcast owns Universal Studios, which has its own animation unit, producing features like Despicable Me and Minions.

DreamWorks has a spotty history on treh merger front. In September 2014 its stock soared more than 25% after reports surfaced that it was in discussions with Japanese wireless carrier Softbank in a deal that was worth about $3.4 billion. That deal ever materialized.  A few months later toymaker Hasbro was reportedly in talks with the studio, but squashed that deal after its stock fell sharply and merchandising partner The Walt Disney Co. privately expressed displeasure.

In 2015, DreamWorks Animation laid off about 500 workers (about 19% of total employees) as it focused more on movies.   

According to a report in the New York Times, the most recent talks would involve a combination of DWA with Comcast’s own animation division Illumination Entertainment. Illumination chief Christopher Meledandri would likely head the combined unit, with DreamWorks Animation founder and CEO Jeffrey Katzenberg exiting. Katzenberg could receive an exit package worth about $21.9 million in the event of a change of control and his involuntary termination or termination for good reason, according to DWA’s most recent proxy statement.

On a conference call with analysts to discuss first quarter results, Comcast opened by saying it would not answer questions regarding deal rumors and speculation.   

While DreamWorks has had spotty success with animated movies – the latest installment of its Kung Fu Panda franchise, Kung Fu Panda 3, made $504.4 million in worldwide box office, behind the $665.7 million Kung Fu Panda 2 generated in 2011 – it also owns an interest in growing online video producer and distributor AwesomenessTV, which could be attractive to Comcast. The programmer is part of the cable operator’s “Watchable” online video offering, which launched a beta test version in September.

More as this story develops.

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