Dreamworks shares jump on reports of SoftBank buyout

Markets Associated Press

Shares of DreamWorks, known for its "Shrek" and "Madagascar" animated films, soared Monday following media reports that Japanese telecommunications and Internet company Softbank is in talks about buying the studio.

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Several reports over the weekend said that DreamWorks Animation SKG Inc. is discussing selling itself to SoftBank Corp., or teaming up with the company in some type of partnership. DreamWorks and SoftBank did not respond to messages seeking comment on the reports, which cited unnamed sources with knowledge of the discussions.

Shares in Dreamworks, which is based in Glendale, California, rose $5.50, or about 25 percent, to $27.86 in afternoon trading. Before Monday, the stock had been down 37 percent since the beginning of the year.

SoftBank bought 78 percent of Sprint for $21.6 billion last year. And it has a 32 percent stake in Chinese e-commerce company Alibaba, which just had a blockbuster initial public offering on the New York Stock Exchange.

The bid appears to be about Softbank's efforts at "media empire building," said Cowen and Co. analyst Doug Cruetz.

"We don't see a lot of rhyme or reason to the pattern of vaguely related assets SoftBank is rolling up; this looks more to us like conglomeratization," Cruetz wrote in a client note. "Attempts have been made many times in the past to marry content and distribution and they generally have not borne fruit (and have often led to significant value destruction)."

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While Dreamworks' "Shrek" and "Madagascar" were hits, some of its other movies, like "How to Train Your Dragon 2," which was in theaters over the summer, have not done as well as anticipated. In the second quarter, DreamWorks reported a loss and its revenue declined. The results missed analysts' expectations.

Dreamworks has been speculated as a potential takeover target before. Earlier this month, Janney analyst Tony Wible said a foreign suitor would be the "most probable" buyer.

"We believe Chinese firms could look to Dreamworks as a means to export media and build up their local film industry," Wible wrote. He added that Dreamworks has fared better than other studios in China, the No. 2 film market, where it has released 13 films and has a local production studio.

"Furthermore, there is a penchant for animated content in the region (10 percent of China's box office)," he wrote in a client note.

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AP Business Writer Michelle Chapman contributed to this report.