Shares of DreamWorks Animation rose almost 30 percent on Monday after news of a proposed acquisition by Japanese telecommunications giant SoftBank Corp.
SoftBank, which controls Overland Park-based Sprint Corp. and recently dropped a bid to acquire T-Mobile US Inc., has offered to buy the studio for $32 a share, according to a person familiar with the talks.
The offer values DreamWorks — the studio behind box-office favorites such as “Shrek” and “Madagascar,” and recent misses such as “Turbo” and “Rise of the Guardians” — at $3.4 billion.
The company’s share price on Wall Street closed at $22.36 on Friday. Despite the sharp increase Monday, shares were still below the company’s 52-week high of $36.01, reflecting uncertainty among some investors about whether the sale will go through.
Several analysts said they view the deal as a good strategic move for DreamWorks, giving it the kind of financial stability it needs to weather box-office misfires and invest in digital media ventures. The company has recorded three write-downs in two years, causing a sharp slide in its share price, which has fallen nearly 40 percent this year.
SoftBank’s interest in DreamWorks almost certainly extends beyond Sprint, analysts said, though the wireless company could benefit from a connection.
“It’s a bigger play for SoftBank than just Sprint,” said Bill Ho, an industry analyst at 556 Ventures LLC. “They’ve got so many properties all over the place.”
Access to Dreamworks movies, Ho said, could become a promotional tactic for Sprint to help it keep subscribers or attract new ones to its wireless network. AT&T’s interest in acquiring satellite television operator DirecTV depends partly on video content to offer subscribers.
Sprint has struggled to hang on to customers as it has worked to update its network, which still lags the three other national carriers in delivering fast speeds needed to stream videos.
One analyst said Monday that Sprint probably has lagged in adding customers with the rollout of the iPhone 6. T-Mobile seems to be gaining the most ground in the new Apple Inc. device’s debut, said Jennifer Fritzsche of Wells Fargo Securities.
“While Sprint indicated it was its most successful launch ever — it seems to be in fourth of the Big 4,” Fritzsche wrote in a note to clients.
Shares in Sprint closed Monday at $6.35, down 1.1 percent.
For DreamWorks, the decision to weigh a sale highlights the challenges faced by chief executive Jeffrey Katzenberg as he seeks to diversify beyond film. DreamWorks, 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 offered $32 per DreamWorks Animation share, according to the Hollywood Reporter, 43 percent more than the stock’s closing price last Friday. The DreamWorks board held an emergency meeting last week to weigh the bid, the publication said.
Dreamworks, taken public by Katzenberg in 2004, is open to other offers, the trade publication 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 has been looking for more U.S. media and technology investments. SoftBank can afford DreamWorks 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 percent 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, Calif.
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 $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 300-year plan in 2010 that included investing in 5,000 companies by 2040. Even as he forecast that 99.98 percent of companies would cease to exist in their current form over the next 30 years, he vowed that SoftBank would survive. Last year, he tried 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.
SoftBank is considering an investment in Mexican wireless carrier Grupo Iusacell SA, people with knowledge of the matter said last week, in what may be its first foray into the fast- growing Latin American market.
The Star’s Mark Davis contributed to this story along with the Los Angeles Times and Bloomberg News.
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