Will a merger between the homes of Shrek and King Kong create a monster force at the box office -- or just make things uglier for both companies? NBC Universal, jointly owned by General Electric
Separately, both Universal and DreamWorks Animation have fallen on rough times. Universal has seen a string of big-budget efforts like Van Helsing and The Chronicles of Riddick wither in theaters. Meanwhile, SEC investigations, lawsuits, and disappointing Shrek2 DVD sales have hammered DreamWorks Animation in the past few months. In its most recent earnings report, it posted a net loss of $3.7 million vs. a year-ago profit of $146.1 million, losing out to competitor and Motley Fool Stock Advisor pick Pixar
Together, however, DreamWorks SKG and Universal have enjoyed a fruitful track record. Their previous joint hits include Gladiator, Meet the Parents and its sequel Meet the Fockers, and Seabiscuit. If ongoing negotiations between DreamWorks co-founder David Geffen and Universal Studios President Ron Meyer pan out, the combined company would lead the market share in both box office receipts and Academy Award nominations. However, if Geffen asks for too much -- speculation pegs $1 billion as the current asking price -- Meyer may have to look elsewhere to boost Universal's fortunes.
So what does this mean for DreamWorks Animation? Nothing at all, perhaps; it's been a separate entity since October 2004. Nevertheless, if DreamWorks SKG and Universal do tie the knot, DreamWorks Animation might enjoy extra funding from the combined studio for mutually beneficial projects.
That's some seriously tempting synergy, especially since DreamWorks Animation seems underappreciated on its own merits. It enjoyed significant box office success with the recent Madagascar, and could see even more multiplex magic with the upcoming Shrek3. Combine that with the prospect of lucrative collaborations with Universal, and DreamWorks Animation at $25 per share seems to be a dream come true.
Wake up to related Foolishness:
- W.D. Crotty thinks that DreamWorks is dreaming.
- In Stephen Simpson's opinion, DreamWorks isn't so dreamy after all.
Tarek Sultani is a freelance journalist who believes that DreamWorks Animation may be the maraschino cherry on the potential DreamWorks SKG-NBC Universal merger. He holds no financial position in any of the companies mentioned in the article.