UPDATED: DreamWorks Animation’s merger talks with Hasbro have stopped after the toy company became concerned about the drop in its stock price following Deadline’s report that Jeffrey Katzenberg’s indie studio and the toymaker were negotiating to combine into an entertainment and merchandise power. Hasbro fell 6.1% over the past two days, as some analysts questioned the logic of a merger and whether Katzenberg’s asking price of $35 a share was too steep. The toy makers’ shares rebounded 2.7% in after market trading on Friday after word got out that the talks have chilled. DWA’s shares fell 9.7% to $23.49 late Friday. They had appreciated about 16% over the last two days, lifting the company’s market value by about $300 million to $2.2 billion.
While negotiations have ceased for now, sources close to the situation say there’s still a slight chance that they’ll be revived. There had been a flurry of activity over the past few weeks. Hasbro CEO Brian Goldner and his board visited the DWA campus recently, and discussions included a potential name (DreamWorks-Hasbro), and a chairman role for Katzenberg. The two CEOs also met in Chicago.
But the idea left many industry watchers scratching their heads, or shaking their fists. There’s been widespread concern about DWA this year after it took writedowns on Rise Of the Guardians, Turbo, and Mr. Peabody & Sherman. (The SEC is investigating the Turbo writedown.) “We can understand why DWA is in a rush to sell; we just can’t see why Hasbro or anyone else would be in a rush to buy,” BTIG’s Richard Greenfield — who has had a “sell” rating on DWA since 2010 — said today.
MKM Partners’ Eric Handler, who has a “neutral” rating on Hasbro, says that while there’s “no doubt that Hasbro wants to turn a number of its franchise properties into feature films…its risk profile would substantially change entering into the volatile movie production business with a company that has not generated positive [free cash flow] in several years and has had trouble making profitable animated films.”
This is the second time over the last few months that a potential DWA sale has faltered. In September the studio’s shares rocketed 26% on reports that Softbank might be interested in a deal, plummeting afterwards when the discussions cooled.