DreamWorks Animation shares soar on Comcast deal talks

DreamWorks Animation shares soared Wednesday after reports that the “Shrek” and “Kung Fu Panda” studio could be sold to Comcast Corp. for $3 billion.

The stock jumped 17% in midday trading on Wall Street to $31.70 a share, while Comcast rose 1% to $61.54.

The potential bid would amount to a 38% premium to DreamWorks’ market value of $2.35 billion, based on the company’s closing share price Tuesday when the talks became public.

Comcast is in talks to buy the Glendale-based studio, but the deal is not complete, according to a person close to the situation who was not authorized to discuss the matter.

Such an acquisition would further diversify Comcast’s NBCUniversal media portfolio at a time when family entertainment and animation franchises are particularly valuable.

Analysts were skeptical about the likelihood of a deal resulting from the talks.

As one of the few freestanding film and TV studios, DreamWorks Animation has long been the subject of takeover speculation with one-time candidates including Japanese telecom giant Softbank and toymaker Hasbro.

Comcast’s film studio Universal already has its own successful animation business in Illumination Entertainment, which had a big hit last year in the “Despicable Me” spinoff, “Minions.” DreamWorks has produced some major hits but has struggled to replicate its early dominance in the animation business.

“Given the company’s continued uneven box office performance and marginal profitability, we have a hard time believing any deal will happen, particularly given the lack of strategic logic for Comcast,” Doug Creutz, an analyst with Cowen & Co., said in a research report.

However, Stifel analyst Benjamin Mogil said in a note to clients that the feature film business may not be the driving factor in the negotiations.

Instead, deal talks likely would focus on China, where DreamWorks Chief Executive Jeffrey Katzenberg has built a significant presence. DreamWorks also has valuable deals with streaming services like Netflix for its television productions and digital holdings, including YouTube network AwesomenessTV.

“While there has been speculation of DWA being a take-out candidate before, we view this time around as different,” Mogil said in his report.

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