NBCUniversal to Acquire DreamWorks Animation in $3.8B Deal

Comcast’s NBCUniversal made things official on Thursday, unveiling a deal to acquire DreamWorks Animation in a deal that puts an equity value of $3.8 billion on the studio. The agreement marks an end of DWA’s long search for a buyer. One of the last remaining publicly traded independent studios, it was founded by and has been led by CEO Jeffrey Katzenberg. In recent years, it had held talks with the likes of Japan’s SoftBank and toy giant Hasbro, among others, but a deal never materialized. Katzenberg, who was standing to get a payout of about $21.9 million if the studio was sold in a deal that would see him leave, will not be running the studio he founded. He will become chairman of DreamWorks New Media, comprising the company’s ownership interests in Awesomeness TV and NOVA, when the deal closes, and also serve as a consultant to NBCUniversal. The studio will become part of the Universal Filmed Entertainment Group, which includes Universal Pictures, Fandango, and NBCUniversal Brand Development and which is led by chairman Jeff Shell. Illumination Entertainment founder Chris Meledandri, whose company has been behind hit franchise Despicable Me/Minions, will “help guide the growth of the DreamWorks Animation business in the future,” the company said. “DreamWorks Animation is a great addition to NBCUniversal,” said Steve Burke, CEO of NBCUniversal. “Jeffrey Katzenberg and the DreamWorks organization have created a dynamic film brand and a deep library of intellectual property. DreamWorks will help us grow our film, television, theme parks and consumer products businesses for years to come. We have enjoyed extraordinary success over the last six years in animation with the emergence of Illumination Entertainment and its brilliant team at Illumination Mac Guff studio. The prospects for our future together are tremendous.” Katzenberg said: “Having spent the past two decades working together with our team to build DreamWorks Animation into one of the world’s most beloved brands, I am proud to say that NBCUniversal is the perfect home for our company; a home that will embrace the legacy of our storytelling and grow our businesses to their fullest potential.” He added that the deal “not only delivers significant value for our shareholders, but also supports NBCUniversal’s growing family entertainment business.” Comcast’s Universal Pictures studio has had much success in recent years with such animated franchises as Despicable Me and Minions, but the DWA deal is set to boost its animation and family entertainment credentials. Observers have said that the combination of NBCU and DWA will create a stronger player in the family content space. NBCUniversal said the deal will give it “broader reach to a host of new audiences in the highly competitive kids and family entertainment space, in both TV and film.” It also touted such DWA franchises as Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon. Film franchises have been a big focus for Burke and his team. Asked on Comcast’s earnings conference call on Wednesday if franchises were an important part of the studio’s strategy, he said “absolutely.” Burke said that “five years ago, we had one franchise,” namely Fast and Furious, but “today, we have eight franchises, and we are hard at work trying to build more.” He added that “we spend a lot of time trying to figure out where films are in the arc of their franchise.” NBCUniversal on Thursday also touted DWA’s “successful” consumer products business, its “thriving TV operation that is a significant supplier of family programming,” and DreamWorks Classics, which includes such classic characters as Where’s Waldo and Rudolph the Red-Nosed Reindeer, which it said “will become part of the NBCUniversal portfolio.” Under terms of the acquisition, DreamWorks Animation shareholders will receive $41 per share in cash. The companies said that this “implies a $3.8 billion equity value based on a fully-diluted share count.” In a regulatory filing, Comcast said the price also implies “a $4.1 billion enterprise value, inclusive of the assumption of debt.” Comcast’s regulatory filing said: “Including reasonable expectations for additional revenue opportunities and operating efficiencies, which will be realized over time, Comcast believes that the acquisition price represents a high single-digit operating cash flow multiple – a fair price for an iconic business, with great assets, low capital intensity and future growth.” The deal is expected to close by the end of 2016. If it fails to get regulatory approval, DWA is entitled to a $200 million break-up fee, according to a regulatory filing. What approvals are required to close the transaction? “The Department of Justice and Federal Trade Commission will need to determine between themselves as to which agency reviews the transaction from an antitrust perspective,” Comcast said. “This transaction does not require FCC approval. In addition to the U.S., merger control filings will also be required in certain foreign jurisdictions. The agreement has been approved by the boards of directors of DreamWorks Animation and Comcast, and the controlling shareholder of DreamWorks Animation has approved the agreement by written consent.”

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