SoftBank in Talks to Acquire DreamWorks Animation Move Comes at Crucial Juncture for DreamWorks Animation and Chief Executive Jeffrey Katzenberg
Japanese telecommunications giant SoftBank Corp. 9984.TO -0.77% is in talks to acquire DreamWorks DWA +0.58% Animation SKG Inc., according to people familiar with the matter.
The development comes at a crucial juncture for DreamWorks Animation and its chief executive, Jeffrey Katzenberg, one of Hollywood's highest-profile executives, who has sought to define a long-term strategy that would help the company counteract a recent spell of mixed box-office results.
Since spinning off from DreamWorks SKG and going public in 2004, DreamWorks Animation stock has largely risen and fallen on the box-office performance of its feature films, something Mr. Katzenberg has been trying hard in recent years to change.
A string of box-office disappointments has severely depressed the company's share price, forcing Mr. Katzenberg to assure investors that moves in industries like television, digital video and consumer products will help make the stock price less reliant on the two to three feature films the company releases annually.
DreamWorks Animation is also trying to reduce the cost of its film budgets, which exceed $100 million and require consistent hits to break even.
For SoftBank, news of the talks come just over a month after the Japanese tech giant dropped plans for another big American acquisition. After taking over Sprint S +0.47% Corp., the third-largest mobile carrier in 2013, SoftBank set its sights on acquiring the No. 4 carrier, T-Mobile U.S. Inc. TMUS +1.44% But SoftBank dropped the plans in August, after meeting strong skepticism from regulators who opposed the concentration of the industry.
SoftBank CEO Masayoshi Son has for some time pursued content acquisitions, including a failed attempt last year to buy Vivendi SA VIV.FR +0.58% 's Universal Music Group, the world's largest recorded-music company.
The deal talks were reported earlier by the Hollywood Reporter.
DreamWorks Animation has produced some of the biggest hits in animation history, with franchises that include "Shrek" and "Madagascar." Its recent track record is much spottier.
Three recent movies: "Rise of the Guardians," "Turbo" and "Mr. Peabody & Sherman" incurred write-downs following weak box-office performances.
DreamWorks's Animation latest release, "How to Train Your Dragon 2," would be a highly profitable film for the company, Mr. Katzenberg said on a recent call with Wall Street analysts, though the movie's domestic gross still fell short of expectations.
The company's movies are released through Twentieth Century Fox, whose parent company, 21st Century Fox Inc., FOXA +2.07% was until recently part of the same company as The Wall Street Journal.
DreamWorks Animation reported a second-quarter net loss of $15.4 million in July, on revenues of $122.3 million.
In July, DreamWorks Animation announced that the U.S. Securities and Exchange Commission is investigating the $13.5 million write-down the company took on "Turbo," a summer 2013 release that underperformed. DreamWorks announced the investigation on an earnings call with analysts but declined to offer any details, saying only that the company was cooperating with authorities.
Mr. Katzenberg's company is a spinoff of DreamWorks SKG, the entertainment company that opened to much fanfare in 1994 as part of an effort run by him, director Steven Spielberg and music executive David Geffen. Mr. Spielberg is the only founder still actively involved with the original company.
DreamWorks SKG is also having mixed success with its films. The studio has scored some hits like "Lincoln" and "The Help," but its more recent releases, like "Need for Speed," have disappointed at the box office. Earlier this month, Mr. Spielberg hired veteran television executive Michael Wright to run the studio, a move thought to come ahead of a coming move by longtime DreamWorks top executive Stacey Snider to Fox.