Comcast acquires DreamWork
Cited as one of the most iconic acquisitions in the animation industry for the year 2016, NBC Universal Division of Comcast Limited, acquired Dreamworks Animation for $3.8 billion. While the deal is still awaiting the regulatory approval and is expected to be complete by the end of 2016, as per the released public statement by both the companies, the entire consideration will be paid through cash and each shareholder of DreamWorks will receive $41 per share, accounting for a 27% premium to the closing price for the stock, the day before the acquisition was confirmed. The acquisition announcement was welcome with a positive sentiment in the market with Dreamworks stocks surging by 24% on the announcement date, and thus generating an astounding 55.26% return for Dreamwork’s shareholders on year-to-date basis. On the other hand, following the announcement, Comcast stock was down by 0.47%.
The entire acquisition was a friendly takeover with Comcast’e executive initiating the talks with DreamWork’s CEO, Jeffrey Katzenberg with the first offer to close the deal valued at $3 billion. However, the deal finally closed on 28th April at the valuation of $3.8 billion, with settlement agreed on cash basis. According to the market experts, DreamWork was in talks with other companies also after it had failed to move past the boom-and-bust cycle on account of its irregular film releases, with latest one being Kung Fu Panda 3. As for Comcast, the company is said to be interested in Dreamworks Intellectual Property Rights(IPR), that will help the latter company compete with Disney in the animation film-making, consumer product and theme parks businesses.
The acquisition, on the whole, will bring a number of number of vintage animation franchise owned by DreamWorks including, "Shrek," "Madagascar," ‘’Casper’’, "Kung Fu Panda" and "How to Train Your Dragon." Another area of interest that are cited as the reason for Comcast’s purchase of Dreamwork is the latter being the supplier of television cartoon to Netflix, and with the latter company expanding its presence around the globe now, Comcast expected to benefit from this trend. Finally, DreamWork is also a part owner of AwesomenessTV, producer and distributor of shows primarily targeted towards teenage girls.
Therefore, considering the wide scope of synergies expected from this acquisition, Comcast is expected to gain an additional market share with this deal, thus justifying the 27% premium it paid to the DreamWork’s shareholders.
References
Wang, Christine. Comcast to buy DreamWorks Animation for $41 a share. 28 April 2016. 3 May 2016 <http://www.cnbc.com/2016/04/28/comcast-to-buy-dreamworks-animation.html>.
