Jeffrey Katzenberg is again weighing a sale of DreamWorks Animation SKG Inc., after an attempt to build the film studio into a mini-Walt Disney Co. was rocked by uneven box-office results.
SoftBank Corp., the Japanese telecommunications company headed by Masayoshi Son, is in talks to buy Glendale, California-based DreamWorks Animation, people with knowledge of the discussions said on Sept. 27. An acquisition hasn’t been formally discussed by senior executives at SoftBank, and the chances of reaching a final agreement are low, said another person familiar with matters at Tokyo-based SoftBank.
The decision to weigh a sale highlights the challenges faced by Katzenberg as he seeks to diversify beyond film. DreamWorks Animation, which previously looked for a buyer, has expanded its TV business and acquired Awesomeness TV, an online video network, while forming a partnership in China that includes live entertainment. Those efforts haven’t grown large enough to offset film write-offs that hurt the stock.
“Most investors believe Katzenberg wants a deal with a bigger media company where he has a path to the CEO seat,” said Paul Sweeney, director of North American research at Bloomberg Intelligence. “This does not appear to be such a deal.”
SoftBank has offered $32 per DreamWorks Animation share, according to the Hollywood Reporter, 43% more than the stock’s closing price on Sept. 26. The DreamWorks Animation board held an emergency meeting last week to weigh the $3.4 billion bid, the publication said.
Shares of DreamWorks Animation rose as much as 21% today, the biggest intraday gain since April 2009. As of 9:40 a.m. New York time, the stock was up 18% to $26.33, giving the company a market value of $2.23 billion.
SoftBank fell 1.2% to 7,807 yen at the close of trade in Tokyo, compared with a 0.4% increase in Japan’s benchmark Topix index. The shares have dropped 15% this year.
Dreamworks Animation, taken public by Chief Executive Officer Katzenberg in 2004, is open to other offers, one of the people said.
21st Century Fox Inc.’s attempt to buy Time Warner Inc. for $85 billion in August set off a wave of speculation about media-industry consolidation. Independent content companies are at a disadvantage negotiating distribution terms with larger pay-TV operators such as Comcast Corp., which is buying Time Warner Cable Inc. for $44 billion. AT&T Inc. is buying satellite service DirecTV for $48 billion. Starz, the movie channel controlled by John Malone, is seeking a buyer, people familiar with the matter said last week.
Son’s SoftBank controls the third-largest U.S. mobile operator, Sprint Corp., and has been looking for more U.S. media and technology investments. The company ended talks to buy the fourth-largest mobile carrier, T-Mobile U.S. Inc., in August because of regulatory opposition.
SoftBank can afford DreamWorks Animation and a successful deal would make it the second Japanese company to currently own a Hollywood film studio. The company’s stake of more than 30% of Alibaba Group Holding Ltd., the Chinese e-commerce company that went public this month, has a market value of more than $70 billion. Sony Corp. owns a film and TV studio in Culver City, California.
Just weeks after abandoning the T-Mobile takeover, SoftBank sold almost $4 billion in bonds. Alibaba’s initial public offering on Sept. 19, which led SoftBank to forecast a gain of about 500 billion yen ($4.6 billion), is a step toward global expansion, Son said at the time on Bloomberg Television’s “Market Makers.”
“The acquisition would benefit SoftBank in revenue, and also by offering content to its mobile carrier, it would benefit Sprint,” said Tomoaki Kawasaki, a Tokyo-based analyst with Iwai Cosmo Securities Co Ltd.
Son, 57, laid out a 30-year plan in 2010 that included investing in 5,000 companies by 2040. Even as he forecast that 99.98% of companies would cease to exist in their current form over the next 30 years, he vowed that SoftBank would survive. Last year, he attempted to buy Universal Music Group from France’s Vivendi.
Son is Japan’s most acquisitive executive, with SoftBank making $51 billion of deals in the past five years, according to data compiled by Bloomberg. That was almost double the amount spent by Japan’s next-biggest buyer, Nippon Steel & Sumitomo Metal Corp.
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