Easily the top news item in the entertainment space recently has been the deal announced between Comcast (NASDAQ:CMCSA) and DreamWorks Animation (NASDAQ:DWA). The former is to pay nearly $4 billion ($41 per share) to acquire the latter in a play aimed at bolstering its animation efforts. The announcement capped many months of rumors that centered on a larger entity swallowing DreamWorks Animation.
In this segment from the Industry Focus: Consumer Goods podcast, Sean O'Reilly and Vincent Shen talk about the deal. Find out how much of a premium that almost $4 billion price tag represents and how happy this arrangement is making DreamWorks Animation shareholders.
A transcript follows the video.
This podcast was recorded on May 3, 2016.
Sean O'Reilly: I definitely didn't see this coming; I don't think anybody saw this coming. Comcast is buying DreamWorks.
Vincent Shen: Yeah. This is a story I was really interested to talk about today. The announcement was made actually last Thursday, and the rumor actually broke probably that Tuesday or Wednesday. Keep in mind that with this deal Comcast, and specifically its NBCUniversal division, will be taking over DreamWorks Animation, integrating that into their film entertainment group. Makes perfect sense, right?
Basic core details of the deal: Offer price was $41 per share, which actually was quite a premium.
O'Reilly: Yeah. It was in the 20s, wasn't it?
Shen: Which I'm sure made DreamWorks shareholders quite happy. That's a premium of 51% from Tuesday's close, which is the price I'm using just because that was before the rumor started getting out. There was a lot of trading activity on Wednesday. In fact, the stock jumped 19% on Wednesday on buyout rumors and then when the official deal was announced, it jumped another 24% following the announcement. In all that's about a 51% premium, massive, that Comcast is paying.
I wanted to break down this discussion into two parts, just from the perspective of DreamWorks shareholders, and then what it means for Comcast specifically. On the side of being acquired, for DreamWorks shareholders, I think overall investors are probably quite pleased with what is turning out to be a nice turn of events for them.