Comcast, the giant cable TV and internet provider, as well as, owner of the NBC networks and Universal Studios is in the market for more Hollywood properties and DreamWorks Animation fits into their strategy. There is no room for Comcast to grow on the cable/internet business but on the entertainment side things are quite different.Valued at $3 billion, DreamWorks Animation's price would be pocket change for Comcast which had revenues of $18.8 billion for the first quarter. What it provides Comcast is a way to enhance Universal's theme parks with already made family-friendly products, like: Shrek, Kung Fu Panda, and Madagascar and provides competition to Disney. Universal has poured billions into its theme parks/resorts but they need more ownership of franchiseable character-driven entertainment.
The benefit to Comcast would be immediate. Additionally, DreamWorks Animation is currently building an animation studio in Shanghai, called Oriental DreamWorks which would provide Comcast a easy path into the Chinese movie market. The deal also gives Comcast a multi-year deal to produce television shows for Netflix (currently a rival to Comcast's cable business).
At $3 billion DreamWorks isn't cheap. Currently its stock shares trade at 25 times earnings but it provides Comcast with the children and family content that has proven to be very valuable in today's fragmented video viewing market.
CGM thinks that Comcast will put a bid in for DreamWorks Animation and that regulatory approval for the purchase will be granted - it will not be a repeat of the $45 billion failed takeover bid by Comcast of Time-Warner.
Best
Jim
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