UPDATE: Word spread late today that Japanese conglomerate SoftBank was in talks to acquire DreamWorks Animation. Jeffrey Katzenberg’s company, spun off from Steven Spielberg and David Geffen as part of DreamWorks, has been looking for new backing lately and numerous parties kicked the tires and didn’t love what they saw. It’s been tough since the company went public. Those animated films often have opened slowly and racked up big grosses over time, and every time Katzenberg had one of those soft opening weekends, the stock would drop sharply, as though shareholders didn’t understand how the movie business works, a reason why some public Hollywood companies like Imagine bought back shares and returned to being private.
EARLIER, 5:31 pm PST: That SoftBank deal, purportedly worth $3.4 billion, was first floated by THR’s Kim Masters. The company would not comment, but a source with knowledge of the matter told Deadline, “talks are at a preliminary stage, but no paper has been signed.” DWA was spun off as a publicly-traded company in 2004. The production company currently releases its films through 20th Century Fox via distribution deal that came after a parting of the ways with Paramount, a studio that felt that the 8% distribution fee wasn’t worth all the strenuous effort that went into servicing Katzenberg’s demands.
As early as the end of July, Deadline analyzed whether the drop in DWA’s stock price signaled a buying opportunity for investors, particularly after DWA reported lower than expected Q2 results, coupled with the fact that the company is being investigated by the SEC over the writedown on Turbo. DWA’s balance sheet had weakened in Q2 with $400M in debt and $32M in cash vs. Q2 2011 when it had no debt and $116M in cash. DWA also disclosed at the time that its next two films — The Penguins Of Madagascar and Home — were costing them approximately $10M more than planned: $135M not including incentive-based compensation. DWA’s films this year have been cyclical, which is often the case with most of the titles in its library. For every underperformer such as Mr. Peabody and Sherman which grossed $272.9M worldwide, there’s a sustainable tentpole with long legs such as How to Train Your Dragon 2 which has made $610.9M globally. DWA has tried to diversify its operations so that its stock price isn’t beholden to a film’s opening weekend gross, specifically by producing original films for Netflix and live theatrical productions. DWA’s stock closed Friday at $22.36 a share, putting its market cap at $1.89 billion.