After years of searching for a buyer, Dreamworks Animation CEO Jeffrey Katzenberg may have finally found one for his company: Comcast Corp. News of negotiations between the two companies was first reported tonight by The Wall Street Journal.
Sources familiar with the talks said that Comcast could potentially pay more than $3 billion for the animation studio. While that amount represents a significant premium over Dreamworks’ current $2.35 billion market valuation, it is less than what both Softbank and Hasbro offered to pay for the company back in 2014. It’s also less than the $4 billion that Disney paid for Lucasfilm and Marvel each, and far less than the $7.4 billion Disney paid for Pixar.
The entertainment and cable conglomerate Comcast already has a robust feature animation program through its ownership of Universal Pictures. Universal is the parent company of Chris Meledandri’s Illumination Entertainment, which makes the Despicable Me films, as well as the upcoming Secret Life of Pets. Universal also serves as the international distributor of Laika’s stop motion films, including The Boxtrolls and the upcoming Kubo and the Two Strings.
But if Comcast buys Dreamworks, it likely won’t be for its feature division, which has lost its luster in recent times and consistently underperformed at the box office, most recently with Kung Fu Panda 3, the lowest-grossing entry in the series. The on-going weakness of Dreamworks’ feature division led to the layoff of 500 employees last year, as well as the shuttering of its northern California animation outpost, PDI Dreamworks.
More attractive to the cable operator is Dreamworks’ TV animation division, which Katzenberg recently called “our most profitable asset,” as well as Dreamworks’ large catalog of vintage properties that it acquired from Classic Media. Those properties include Mr. Peabody and Sherman, which Dreamworks has turned into both a feature and Netflix series, and Voltron, which Dreamworks is currently turning into a Netflix series. This large volume of children’s content could be used throughout Comcast’s broadcast and online outlets.
Negotiations are nowhere near final yet, according to the WSJ, so it is too early to make guesses about how Dreamworks would be merged into Universal’s existing animation operations or whether Jeffrey Katzenberg would accompany the company to Comcast.
Last month, Katzenberg told investors that he “fantasized” about merging with another company: Viacom-owned Paramount Pictures. “I could imagine that with a good financial partner coming with us, putting the assets of Paramount and DreamWorks together could be extremely valuable and we could bring a lot to that business,” he said.
Speaking more broadly about the idea of merging with a bigger company, Katzenberg said, “I would want to do it in a way that was a good thing for the company and for shareholders, not just because it would be a good thing to have.”