New Owner for Shrek and DreamWorks Animation?

Style Magazine Newswire | 9/29/2014, 10:56 a.m.
DreamWorks Animation has an inconsistent track record in Hollywood and on Wall Street. Could Japan's SoftBank change things by buying ...
Jeffrey Katzenberg, chief of DreamWorks Animation, has demanded a high price for the studio. Credit Philip Montgomery for YouTube

By Paul R. La Monica

Coming next from DreamWorks Animation: How to Train Your Investment Banker? Or the Penguins of Madagascar Head to Tokyo?

Shares of DreamWorks Animation surged nearly 20% Monday following a report that Japan's SoftBank may want to buy the studio behind the "Shrek," "Madagsacar," "Kung Fu Panda" and "How to Train Your Dragon" movie franchises. The story was first published by The Hollywood Reporter over the weekend.

Spokespeople for DreamWorks Animation and SoftBank were not immediately available for comment about the report.

DreamWorks Animation, founded by Jeffrey Katzenberg, Steven Spielberg and David Geffen, has been a nightmare of a stock this year. Prior to Monday's big pop, shares were down nearly 40%.

The company has lost money in its past two quarters due to some recent duds at the box office and weak DVD sales .

The studio's "Mr. Peabody and Sherman" -- based on characters from the early 1960s cartoon cult classic "The Bullwinkle Show" -- was a major flop this spring. (Investors probably wish DreamWorks could use Mr. Peabody's WABAC machine to go back in time and decide not to do this movie.) "Turbo", about a racing snail, also flopped in the summer of 2013.

Although "How to Train Your Dragon 2" was a big critical success and has done well overseas, some investors are disappointed by the fact that the film's box office in the U.S. was lower than the first film's take in 2010.

DreamWorks Animation, which is run separately from the DreamWorks live action studio, has struggled to impress investors since it went public nearly 10 years ago. It hit an all-time high of near $45 in early 2010, but the stock now trades slightly below its initial public offering price of $28. Even with the big pop on Monday, the stock is down 26% in 2014.

The movie business is notoriously difficult. Disney, which acquired DreamWorks Animation rival Pixar in 2006, has been far more successful at the box office over the long haul than DreamWorks Animation. And other major media companies have been busy building out their animation studios as well.

"The LEGO Movie," released by Warner. Bros., is the third-highest grossing film this year. (Warner Bros. is owned by CNNMoney parent company Time Warner.) Universal, owned by Comcast, had one of the biggest hits of 2013 with "Despicable Me 2."

So it makes sense that DreramWorks Animation might be vulnerable to a takeover. It doesn't have the same financial firepower behind it.

Enter SoftBank. The tech conglomerate is trying to become a major player in media, telecom and the Internet across the globe. SoftBank owns a more than 30% stake in Alibaba, the Chinese e-commerce giant that went public earlier this month, and it's also the controlling investor in U.S. wireless company Sprint.

But why would DreamWorks Animation be a good fit for SoftBank? The purchase of a movie business would inevitably bring up comparisons to how Sony has struggled with its film studio lately.