WSJ : Hasbro in Early Talks to Buy DreamWorks Animation

Hasbro in Early Talks to Buy DreamWorks Animation
A Deal Would Bring a Diversifying Animation Studio Under the Fold of a Major Toy Maker

Hasbro Inc. is in early talks to buy DreamWorks Animation SKG, in a deal that would bring an animation studio that just recently began diversifying beyond the big screen under the fold of a major toy maker, according to people familiar with the matter.

A combination of the two companies could accelerate efforts at each to move beyond their core businesses.

DreamWorks Animation has expanded into consumer products in recent years but lags behind Walt Disney Co. , and Hasbro had just changed tack on its entertainment business, selling off some of its stake in the Hub cable network with Discovery Communications Inc.

Hasbro, which has been contemplating such a deal for years, has clout with big retailers that DreamWorks could benefit from, too, one person familiar with the talks said.

News of the possible merger comes about six weeks after reports emerged that the Japanese telecom giant SoftBank Corp. was in talks to acquire the animation studio. However, those talks cooled shortly after reports first surfaced.

Hasbro also recently launched its own film label, Allspark Pictures, with movies based on its toy brands My Little Pony, Jem and the Holograms already in the works.

Hasbro had hoped that Hub could become a force in children’s television that would allow it to feature shows based on its toys, such as G.I. Joe, Transformers and My Little Pony. But it had a hard time edging in on incumbent children’s networks including Viacom Inc. ’s Nickelodeon and Disney Channel.

It is now launching a new series of its “Transformers” cartoon on the Cartoon Network.

DreamWorks Animation spun off from DreamWorks SKG and went public in 2004. Over the past couple of years, Chief Executive Jeffrey Katzenberg has led an effort to diversify his company beyond theatrical releases, including expansions in online video, publishing and television.

Discussions between the two companies are at an early stage. Should a deal be reached, it would likely come in the next two to four weeks, one person familiar with the matter said. DreamWorks is seeking a significant premium to its current share price, this person said, adding that other potential buyers are also hovering around the company.

Last month, DreamWorks reported a third-quarter net income of $11.9 million on revenue of $180.9 million. Its consumer-products division contributed $12.1 million in revenue, up from the $11.8 million in revenue seen in the quarter a year earlier.

The talks were reported earlier by the Hollywood trade website Deadline.

Hasbro and DreamWorks Animation have done business before. Last year the two companies agreed to make toys and games related to two forthcoming DreamWorks releases, “B.O.O.: Bureau of Otherworldly Operations” and “Trolls.”

>>> Nordgold Requests Consent to Make 140% Premium Offer to Shareholders of

Nord Gold N.V. ("Nordgold" or the "Company", LSE: NORD), the internationally diversified pure-play gold producer, announces that it has sent a request to the board of directors of Canadian-based gold exploration and development company Carlisle Goldfields Limited ("Carlisle", TSX: CGJ) that it consents to receive an offer from Nordgold to purchase all of Carlisle's issued and outstanding shares.
{CGJ CN Equity DES<Go>}

(Jefferies) Zoetis, Inc. Animal Magnetism

Key Takeaway
We have suspected that ZTS may become a bid target going into 2015 and that
the Investor Day on November 18 is geared towards bid defense. Bayer is the
most logical and motivated potential acquirer of the business should activists
trigger an M&A process, in our view. Whilst ZTS shares have appreciated
recently, we see room for Bayer to offer at least a 25% premium and drive high
single digit earnings accretion from what we see as a strategic asset for them.

Bears caught sleeping by activists: We have long held the view that Zoetis was likely to
become the subject of bid speculation going into 2015, as a potential consolidation target
for the Animal Health industry. On November 11, Pershing Square Capital Management
disclosed that it and Sachem Head Capital Management together have taken approximately
8.5% and 1.6% stakes in Zoetis, respectively. Whilst this specific event was unexpected, it
has fueled the market's interest in Zoetis as a potential target for M&A activity.

We are cautious on a take-out near term; Think mid-2015 is more likely: First
we look to remind investors that although activist investors have taken a significant stake,
there is no actual bidder yet. Whilst Valeant (VRX, $131.09, Buy) is often cited as a potential
suitor, we believe that an all debt/ cash bid from Bayer (BAYN GR, €109.50, Buy) is the most
likely outcome as it is best placed to get real revenue synergies and take out cost without
damaging the future of the business. There could also be some tax benefits as Bayer may
neutralize repatriation taxes as a non-US buyer. Timing is another issue on our minds as it is
unclear as to exactly when Zoetis can be bought without triggering a capital gain liability,
given the tax-free spin status awarded to it during the separation from Pfizer (PFE, $30.42,
Buy). We caution that sometime during H1'15 might be the earliest that a transaction can
happen in that regard.

We believe ZTS is a key transaction for Bayer: Our investment thesis on Bayer
has for some time assumed that it would bolster up Consumer Health (which it did in
2014 through Merck & Co. [MRK, $59.31, Hold]), separate Bayer MaterialScience (which
management have announced may happen as early as mid-2015), and scale up Animal
Health, which management have recently indicated that they are strategically analyzing.
We also understand from previous conversations with management that there are no
major areas of concern regarding anti-trust for Bayer Animal Health and Zoetis. With few
standalone Animal Health assets of scale left in the industry, we believe Zoetis remains the
last viable option for Bayer in the near term to give sufficient critical mass to its Animal Health
operations before the current CEO, Marijn Dekkers, retires at the end of 2016.

Reverse engineering the accretion model: If Bayer were to bid for Zoetis, we believe
that the potential revenue synergies and cost savings should be driven on the Bayer Animal
Health side of the transaction. This is because it represents the smaller entity within the
deal and results in lower levels of cost saving than might be arrived at otherwise. We
have attached a summary of our pro forma accretion model in Exhibit 1, assuming: 1.
Transaction occurs in 2015, and closes at end of 2015; 2. 25% premium paid for Zoetis
($53.30 per share), representing 5.4x 2015E revenues (note Novartis Animal Health (NOVN
VX, CHF89.50, Buy) was agreed to be sold to Eli Lilly (LLY, $67.40, Hold) at 4.9x 2013A
sales); 3. 5% revenue synergies off Bayer Animal Health’s revenue base by 2020E; 4. 25%
cost savings off Bayer Animal Health’s total operating costs by 2018E; 5. Blended tax rate
(weighted average basis), though this may significantly underestimate the tax benefits of
the transaction to Bayer; 6. Debt funded at 4% interest rate. On this basis we believe that
Bayer would be a determined buyer of Zoetis and could potentially make a transaction work
at valuations of $53 per share or more.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: LJPC -12.5%, (also results from Phase 2 Study of GCS-100 in Chronic Kidney Disease Being Presented), RVNC -9.5%, JCP -7.6%, AEG -7.5%, RLGT -6.8%, XONE -5.2%, LOCM -4.1%, NTAP -3.8%, HIMX -3%, OAKS -2.7%, HTHT -2.1%, NTES -2%, KSS -1.6%, CHMI -1%, CSCO -0.9%, (CFO to step down -- Cisco plans to appoint Kelly A. Kramer to succeed Mr. Calderoni. She is currently senior vice president, Business Technology and Operations Finance of Cisco)

M&A news: HAS -2.6% (reports that Hasbro (HAS) in discussions to purchase DWA), PG -1.2% (Berkshire Hathaway Inc. (BRK.A) announced that it has entered into a definitive agreement to acquire the Duracell battery business from P&G )

Select EU financial related names showing weakness: SAN -1.3%, RBS -1%, DB -0.7%, HSBC -0.7%

Select oil/gas related names showing early weakness: SGY -1.9%, TOT -1.5%, SDRL -1.5%, BP -1.1%, STO -1.1%, RDS.A -1%, XOM -0.8%

Other news: BAXS -72.2% (announced that the company has filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code), WLT -3.6% ( files $2.5 bln mixed shelf ), ALG -3.5% (priced the public offering of 1,722,270 shares of common stock by selling shareholders at $43.00/share), MNK -3.2% (responds to FDA's expected reclassification of Methylphenidate ER), ALU-3.1% (still checking), TCBI -2% ( announces ~2.5 mln share common stock offering), VOYA -2% (announced that ING Group has entered into an agreement with a syndicate of underwriters to sell Voya Financial common stock in an underwritten public offering), RXN -2% (announced the launch of a public offering of 14,729,045 common shares by funds affiliated with Apollo Global Management), MX -1.9% (co said it expects to file 2013 Form 10-K and Form 10-Q soon but cannot be certain how much time will ultimately be required to complete the restatement process), CHMI -1% (files for the sale of 1 mln shares by Chairman of the Board Stanley Middleman; co also filed for a $500 mln mixed securities shelf offering)

Analyst comments: MSG -1.3% (downgraded to Equal-Weight from Overweight at Morgan Stanley), BMY -1.1% (downgraded to Equal-Weight from Overweight at Morgan Stanley), MRVL -2.5% (downgraded to Sell from Neutral at Goldman), JBL -0.6% (downgraded to Neutral from Buy at Goldman
)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: ZAZA +31.4%, FUEL +15.8%, CYBR +14.4%, AMOT +13.1%, MARA +10.3%, ABAC +10.1%, ASTI +9.9%, RSTI +9.6%, OXGN +8.6%, HUBS +5.9%, ENZY +4.9%, ICLD +4.5%, IMOS +4.4%, CNAT +4.3%, AGRO +3.5%, SFS +3.2%, SAND +3.1%, ARCW +2.6%, FLY +2.6%, RWLK +2.5%, WMT +2.2%, PNNT +2%, EVRY +1.6%, VIAB +1.1%, TSEM +1%

M&A news: DWA +23.4% (reports that Hasbro (HAS) in discussions to purchase DWA), INTL +3% (acquires G.X. Clarke & Co), PT +1.7% (cont momentum on takeover spec)

Other news: IMOS +4.4% (Board authorized the repurchase of $15 mln of the company's common stock), ERIC +2.5% (provides updates on growth and development at its Capital Markets day), SRPT +1.4% (announced that it has initiated dosing in a clinical study of eteplirsen for the treatment of Duchenne muscular dystrophy), TWTR +1.4% (followng analyst day), ACT +0.9% (announces FDA acceptance of sNDA for SAPHRIS for the treatment of bipolar I disorder in pediatric patients), GME +0.6% (disclosed that its Board has authorized $500 mln of funds to be used in the company's share repurchase plan)

Analyst comments: TUBE +4.5% (initiated with a Overweight at Piper Jaffray), GNW +2.2% (upgraded to Outperform from Mkt Perform at Raymond James), BRCM +2.1% (upgraded to Buy from Neutral at Goldman), PHG +1.6% (added to Europe Best Ideas list at Morgan Stanley), HCP +1.2% (upgraded to Overweight from Equal-Weight at Morgan Stanley ), DGX +1% (upgraded to Buy from Hold at Deutsche Bank), UTEK +0.9% (initiated with a Buy at Stifel)

>>> US Early pre-markets gappers

Early pre-markets gappers

Gapping up: DWA +27.9%, FUEL +16.1%, CYBR +14.2%, ZAZA +13.7%, ABAC +10.0%, VGGL +5.4%, IMOS +4.1%, HIMX +3.9%, RWLK +6.1%, INTL +3.0%, GNW +2.7%, ERIC +2.5%, ARCW +2.6%, WMT +2.2%, NOK +2.2%, OXGN +1.7%, TWTR +1.3%, SRPT +1.3%, TSEM +1.3%, PT +1.2%, CCL +1.0%, FSLR +1.0%, JKS +1.0%, V +1.0%

Gapping down: BAXS -76.7%, RGLS -7.2%, AEG -6.1%, ALG -6.1%, JCP -5.9%, NLNK -4.6%, NTAP -3.1%, WLT -3.0%, VOYA -2.4%, RATE -2.3%, MX -1.9%, ALU -1.8%, CXCO -1.8%, MRVL -1.8%, KSS -1.6%, BCS -1.5%, MRD -1.2%

>>> Kohl's misses by $0.04, reports revs in-line

Kohl's misses by $0.04, reports revs in-line

Reports Q3 (Oct) earnings of $0.70 per share, $0.04 worse than the Capital IQ Consensus Estimate of $0.74; revenues fell 1.6% year/year to $4.37 bln vs the $4.39 bln consensus.
  • Q3 comparable store sales of -1.8%, vs recently updated guidance/current estimate of -1.4%
  • Co ended the quarter with 1,163 stores in 49 states, compared with 1,158 stores at the same time last year

>>> Wal-Mart beats by $0.03, reports revs in-line; guides Q4 EPS in-line; Q3 US

Wal-Mart beats by $0.03, reports revs in-line; guides Q4 EPS in-line; Q3 US comps +0.5%; sees US Q4 comps flat to 1%

Reports Q3 (Oct) earnings of $1.15 per share, $0.03 better than the Capital IQ Consensus Estimate of $1.12; revenues (excluding membership and other revneue) rose 2.8% year/year to $118.08 bln vs the $117.41 bln consensus.
  • Co issues in-line guidance for Q4, sees EPS of $1.49-1.59 vs. $1.57 Capital IQ Consensus Estimate (excluding an estimated negative impact of approximately $0.03 per share related to the future closure of underperforming stores).
  • Comps: WMT reports U.S. Q3 comparable store sales +0.5% vs relatively flat prior guidance (-0.3% Q3 last year).
  • Comp sales for the Neighborhood Market format increased ~ 5.5%.
  • WMT reports Sam's Club Q3 comparable store sales of +0.4% vs slightly positive guidance (excluding fuel).
  • E-commerce sales globally increased ~ 21% on a constant currency basis.
  • Comps Guidance: WMT sees U.S. Q4 comparable store sales flat to 1% and Sam's Club comparable store sales flat to 2%.
  • Traffic: During the 13-week period, Walmart U.S. comp traffic decreased 0.7 percent, while average ticket increased 1.2 percent. Excluding fuel,1 Sam's Club comp traffic was up 0.2 percent, and average ticket increased 0.2 percent.
  • "We anticipate our full year effective tax rate will range between 32 and 34 percent."