DreamWorks Animation share price up, in talks over acquisition by SoftBank

According to people familiar with the situation, billionaire Masayoshi Sons SoftBank Corp. is in talks over acquiring DreamWorks Animation SKG Inc, the Hollywood studio behind the “Shrek”, “Kung Fu Panda” and “How to Train Your Dragon” films.

According to the Hollywood Reporter, Jeffrey Katzenberg’s DreamWorks Animation received a bid of $3.4 billion, or $32 per share, but it was unclear whether the talks would yield a sale of the studio. If the deal turns out successful, it would make SoftBank the second Japanese company to own a Hollywood film studio, following Sony Corps purchase of Columbia Pictures in 1989. This would make DWA a part of a much larger company, giving it an advantage in talks with distributors of its movies and TV shows. It would also accelerate its expansion in Asia, where SoftBank is already allied with e-commerce giant Alibaba, which held the largest IPO on record earlier this month.

Two years ago, DWA formed Oriental DreamWorks in a joint venture with three Chinese media companies with the goal to produce local-language animation, including the co-production of “Kung Fu Panda 3”, set for release in 2016. The joint venture, in which DreamWorks Animation holds a 45% stake, announced plans to open a $2.4-billion entertainment complex in Shanghai dubbed “The Dream Center”.

In 2004, DWA was spun as a separate public company out of DreamWorks SKG, the studio founded by Steven Spielberg, Jeffrey Katzenberg and David Geffen two decades ago. Led by Chief Executive Mr. Katzenberg, DWA has scored some of Hollywoods most famous animated hits, but it had its fair share of stumbles as well. The companys stock has fallen more than 20% in the last 12 months and 37% in 2014 amid disappointing performance from some of its movies. The studio took write-downs on three of its recent films – “Turbo”, “Rise of the Guardians” and “Mr Peabody and Sherman”.

Meanwhile, SoftBank, led by billionaire Masayoshi Son, continues on a path set by its founder of becoming the worlds largest company. Last week, the Japanese wireless carrier booked a $4.6-billion gain from Alibabas Initial Public Offering, which was held earlier in September. SoftBank is Alibabas largest shareholder with a 32% stake valued at $71 billion as of Fridays close, which was purchased 14 years ago for $20 million.

SoftBank acquired Vodafones Japanese division eight years ago and started a price war in the Japanese telecoms sector. Mr. Son attempted to repeat the scenario, having tried to acquire T-Mobile US Inc., the fourth-largest American cellular phone network, for most of this year. He hoped to merge it with Sprint Corp., the third largest US wireless carrier which it already owns, to better compete with the leaders in the segment Verizon and AT&T, but the negotiations were abandoned due to regulatory opposition. In recent months, the Japanese carrier has been linked to several potential acquisitions, including Vodafone Group Plc, Line Corp., Grupo Iusacell, a Mexican wireless carrier, and Yahoo Inc.

SoftBank has declined to comment on those “rumors”, including the negotiations with DreamWorks Animations. DWA has also abstained from commenting.

DreamWorks Animation SKG Inc rose by 0.58% on Friday on the NASDAQ to close at $22.36 per share, marking a one-year change of -22.12% and valuing the company $1.89 billion. According to CNN Money, the 10 analysts offering 12-month price forecasts for DreamWorks Animation SKG Inc have a median target of $22.00, with a high estimate of $27.00 and a low estimate of $17.00. The median estimate represents a -1.61% decrease from the last price of $22.36.