SoftBank, DreamWorks Animation Talks Cool
Two Sides Still Could Renew Talks or Agree on a Content Partnership
SoftBank Corp.'s discussions to acquire DreamWorks Animation SKG Inc. have cooled, according to people familiar with the matter, less than two days after word first emerged of the talks.
It wasn't immediately clear what had happened between Saturday, when the talks were under way, and Monday. It remained possible that negotiations could restart, two of the people said. The two sides could ultimately strike a deal other than an outright takeover, one of the people said, for instance some kind of content partnership.
DreamWorks shares spiked on the initial report, rising 26% Monday to close at $28.18 on the Nasdaq Stock Market. However, following news of the talks cooling, DreamWorks shares fell 9% from the Monday close in after-hours trading.
The talks had come about two months after Tokyo-based SoftBank, which owns Sprint Corp., abandoned a bid for T-Mobile US Inc.
Headed by veteran Hollywood executive Jeffrey Katzenberg, DreamWorks has released animated hits like "Shrek" and "Madagascar," though recent releases like "Rise of the Guardians" and "Turbo" have disappointed at the box office, depressing its stock price.
The prospect of a takeover gave DreamWorks its most significant share boost since its stock fell after disappointing second-quarter results in July. The Glendale, Calif., company reported a second-quarter loss of $15.4 million on revenue of $122.3 million.
Eric Wold, a stock analyst at B. Riley, said SoftBank could be attracted to DreamWorks because of a "beaten-down valuation that still has a valuable content library and character franchise," adding that the telecommunications company could be looking for ways to get content from DreamWorks's youth-oriented YouTube company, AwesomenessTV, to its Sprint consumers.
AwesomenessTV, purchased by DreamWorks for an initial $33 million in May 2013, is one of several recent acquisitions at DreamWorks as part of an effort to diversify the studio's business into online content, consumer products and television. The animation company releases two to three films a year, an arrangement that requires the public company to release a steady stream of hits to keep the stock price afloat.