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DreamWorks (DWA) Rumored to be in Talks with Softbank

By: , dated September 30th, 2014

Shares of DreamWorks Animation (DWA) surged +5.82 or +26.03 percent to $28.18 per share on Monday after an article in the Hollywood Reporter broke the news that Japanese conglomerate, Softbank would make a bid for the animation studio. DreamWorks stock subsequently declined in afterhours trading, dropping -2.08 or -7.38 percent to $26.10 per share as no confirmation of the deal was disclosed.

Universal City, California based DreamWorks Animation is a film production company originally founded in 1994 by Steven Spielberg, David Geffen and Jeffrey Katzenberg. The company, spun off of DreamWorks studio in 2004, focuses on the production and development of films, video games and television programming. DreamWorks Animation is responsible for ten films which have grossed over $100 million apiece. The company is best known for producing Shrek and Shrek II. The company’s latest releases include Mr. Peabody and Sherman, which has grossed $273 million worldwide, and How to Train Your Dragon 2, grossing $611 million worldwide.

According to a source cited by the Hollywood Reporter in an article published on September 27th, DreamWorks would be offered $32 per share by Japanese company Softbank in a deal that values DreamWorks at $3.4 billion. The source said that the DreamWorks board had held an emergency meeting last Thursday to consider the deal and that Jeffrey Katzenberg would remain with the company for five years after signing a contract with Softbank.

Nevertheless, according to a source in Japan, cited by Reuters and the Wall Street Journal, talks between the two companies had cooled, which caused shares to decline in Monday’s afterhours trading. Talks could restart, with the two sides perhaps striking an alternative deal that would not involve an outright takeover, but perhaps a content partnership.

While speculation is driving volatility in the stock, some analysts do not expect the company will be taken over at all. One analyst — who has a $20 per share price target on DreamWorks — cites the studio’s inconsistency in recent quarters: making +$10.1 billion and +$17.2 billion in the 3rd and 4th quarters of 2013, while reporting losses of $42.9 billion and -$15.4 billion in the first and second quarters of 2014.

While no reasons for the stall in the talks has been revealed, some analysts are speculating that Softbank may be interested in DreamWork’s library of movies and that Softbank’s ultimate objective in its dealings with DreamWorks could be to promote its Sprint operation with a younger audience.

DreamWorks stock has been fluctuating between $19 and $36 per share this year, with the stock down over 37 percent year to date. The stock was trading in the mid teens in 2012 after having trading as high as the mid 40s in 2010. DreamWorks did not comment on the possible takeover.

Other News About DreamWorks
DreamWorks and SoftBank Deal Talks Reportedly Have Cooled
Talks between the two companies have stalled.
Why you should stay away from this possible deal
Analyst skeptical about potential takeover

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Jay Hawk Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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