Comcast ‘in talks to buy DreamWorks for $3bn’

An agreement could lead to Comcast merging Universal Pictures with DreamWorks Animation.

Buying Dreamworks, the maker of the “Shrek” and “Kung Fu Panda” movies, would bolster Comcast’s collection of animated films

Comcast, the parent of Universal Pictures, is in talks to acquire DreamWorks Animation SKG Inc. for more than $3 billion, the Wall Street Journal reported, citing people familiar with the discussions.

Though a deal may not be reached, an agreement would probably lead to Comcast merging Universal Pictures with DreamWorks Animation, according to the Journal. It wasn’t immediately clear how such a transaction would affect DreamWorks Chief Executive Officer Jeffrey Katzenberg.

Buying the maker of the “Shrek” and “Kung Fu Panda” movies would bolster Comcast’s collection of animated films as the largest US cable provider searches for ways to grow amid a trend of cord-cutters dropping traditional TV for online video services like Netflix. Such a move may also illustrate how Hollywood is heating up in terms of deal activity, with Viacom saying it’s looking to sell part of Paramount Pictures.

“Content owners have become increasingly valuable as of late and we could argue Comcast sees potential value in the library of franchises, characters that could be integrated,” said Eric Wold a B. Riley & Co. analyst covering the entertainment industry.

DreamWorks Animation spokesman Dan Berger declined to comment. Comcast representatives weren’t immediately available for comment.

The report revives merger speculation surrounding DreamWorks Animation since 2014, which included approaches from Hasbro Inc. and Japan’s SoftBank Group Corp. After a series of film write-offs, Katzenberg in early 2015 implemented a wide ranging restructuring that involved cutting 18 per cent of its workforce and selling its Glendale, California-based campus after costs swelled.

The studio also committed to reducing its film costs and the number of films it made a year to two. Katzenberg himself said he would refocus on making his features profitable. There have been some bright spots, with the studio seeing some success with “Home,” its only feature last year. and its growing TV business.

Comcast’s Universal Pictures comes off its best year ever in movies but will faces the challenge of keeping up with Walt Disney Co. — owner of LucasFilm, Marvel and Pixar — which will produce an estimated record number of billion-dollar movies in 2016. Comcast’s NBCUniversal business — which includes TV, films and theme parks — generated about 38 percent of total revenue and 30.5 per cent of operating income last year.

DreamWorks shares slipped 0.1 per cent to close at $27.12 in New York on Tuesday. Comcast, which reports earnings early Wednesday, climbed 0.1 per cent to $61.05 before the Wall Street Journal report.

© 2016 Bloomberg L.P