Hasbro Inc share price up, in talks to buy DreamWorks Animation

Hasbro Inc is in talks to acquire DreamWorks Animation SKG, which previously negotiated with several other potential buyers, including SoftBank.

The deal would bring the creator of the Shrek and Kung Fu Panda movies under one roof with the maker of My Little Pony, Twister and Monopoly, as both companies seek opportunities to move beyond their core businesses.

In recent years DreamWorks expanded to consumer products but is well behind Walt Disney. On the other hand Hasbro is not unfamiliar with film productions either. Despite selling some of its stakes in the Discovery Family Channel, previously called the Hub, it still has a 40% stake in it. The company also has a history of lending its products to movie productions, including “Transformers: Age of Extinction”, the top-grossing film worldwide this year.

Hasbro recently launched Allspark Pictures, its own movie label, that will feature films based on its toy brands My Little Pony, Jem and the Holograms. The toymaker also released its new “Transformers” animation series aired on the Cartoon Network.

According to people familiar with the matter, the two companies have agreed on the basic outline of the deal with the price likely to exceed $30 a share, 35% above DreamWorkss closing price on Wednesday. The company has a market capitalization of $1.9 billion.

After the deal is closed CEO Jeffrey Katzenberg would remain with DreamWorks. In the last few years Mr. Katzenberg has led an effort to diversify the company beyond movie productions, including expansions in online video, publishing and television.

DreamWorks Animation SKG was spun off from DreamWorks SKG and went public in 2004. Since then the company has had some successful productions and some not so lucrative, like the recent titles Rise of the Guardians, Turbo and Mr. Peabody and Sherman.

DreamWorks has agreed to a $2.4-billion deal to build an entertainment complex in Shanghai. The company also formed a joint venture with three state-owned media companies to produce film and television series in China.

Last month, DreamWorks stated a third-quarter revenue of $180.9 million, accompanied with a net income of $11.9 million.

Negotiations between the two companies are still at an early stage, said a person familiar with the situation, and added that other potential buyers are looking into DreamWorks.

Hasbro Inc gained 1.41% on Wednesday and closed at $57.47 on the NASDAQ, marking a one-year increase of 12.14%. The company is valued at $7.22 billion. According to CNN Money, the 7 analysts offering 12-month price forecasts for Hasbro Inc have a median target of $62.00, with a high estimate of $66.00 and a low estimate of $55.00. The median estimate represents a 7.88% increase from the last price of $57.47.