The most powerful executive in Hollywood lives in Philadelphia, it looks. Comcast CEO Brian Roberts bolstered that case nowadays by using agreeing to pay $three.8 billion so as to add DreamWorks Animation to his NBCUniversal operation — which is connected to the nation's greatest collection of cable television and broadband methods.
What does that mean for the agencies? Comcast and DWA are nevertheless figuring out details after a whirlwind negotiation that grew to become more urgent Tuesday nighttime when observe of the talks leaked. This morning the businesses put out an easy press free up with no convention name to quick Wall highway or huge SEC filings offering monetary details.
what's commonly used: DWA's animation operations will develop into part of popular Filmed enjoyment community while co-founder and CEO Jeffrey Katzenberg consults for NBCUniversal and turns into chairman of DreamWorks New Media — a potential spinoff candidate. He's scheduled to talk with analysts on might also 5, when DWA releases its Q1 income.
right here's the obvious motive for the deal, and state of play for the newly engaged organizations:
Q: Why does Comcast desire DWA?
A: Executives say that DWA will help NBCUniversal's movie animation and customer items organizations, strengthen characters for theme park sights, and supply tv shows for youngsters.
Q: That's it?
A: DWA is inexpensive.
Q: low-priced? Analysts say that Comcast's paying a high expense for DWA.
A: This depends on your perspective. real, the $41-a-share offer is fifty one% bigger than DWA sold for before information in regards to the talks leaked. however the studio's shares were overwhelmed up within the starting of 2014, and had been caught in impartial for the reason that then.
Q: nevertheless, $4.1 billion is a lot of money.
A: Comcast can buy DWA without breaking a sweat. It has a market value of very nearly $one hundred fifty billion, making it 36.5 instances larger than DWA. The cable gigantic says the deal gained't interfere with its vow to spend $5 billion this year repurchasing shares. It curiously didn't appoint an investment bank to aid with the deal. And its buyers don't appear to care: Comcast shares are up below 1% because Tuesday.
Q: Will Comcast be capable of finding any savings or synergies at DWA?
A: The enterprise apparently believes it could actually. Comcast says the buy cost represents a "high single digit working money movement dissimilar." Wells Fargo Securities' Marci Ryvicker did the math and says that translates to $300 million a year in rate reductions or synergies. PiperJaffray's Stan Meyers sees $250 million including $50 million from better movie splits with theaters, $50 million in distribution prices, $50 million from movie funds expenses, and $a hundred million in overhead.
Q: Why was DWA beaten up?
A: DWA misplaced funds on four of the ten movies it released previous to January. It recorded write-downs for upward thrust Of The Guardians, faster, Mr. Peabody And Sherman, and Penguins Of Madagascar. Katzenberg reduce expenses — together with 500 layoffs — and diverse into other corporations, exceptionally television and new media.
Q: How did its potentialities look earlier than it made the take care of Comcast?
A: Cloudy. DWA nevertheless makes most of its money from characteristic films, and some analysts these days lowered their earnings estimates. foreign income for Kung Fu Panda three, launched in January, are coming in under Wall road expectations. DWA gained't have a different probability to impress traders unless November, when it releases Trolls. That's a lot of force to put on one film — in particular one which opens the equal weekend as surprise's doctor unusual and two weeks before Warner Bros.' fantastic Beasts And where To find Them.
Q: Did Katzenberg panic?
A: He has been trying to make a deal for years, and had critical talks that didn't pan out with Hasbro and SoftBank. however the threats to his stock expense could have added some urgency to his conversations with Comcast. The deal got here together immediately: Early this month DWA agreed to promote a 24.5% stake in AwesomenessTV, which it controls, to Verizon. That likely wouldn't have came about if the studio believed it became about to be bought by using Comcast.
Q: Does the contend with Comcast face any limitations?
A: doubtless no longer. Katzenberg controls 60% of DWA's balloting shares.
Q: How about federal antitrust regulators?
A: both the Justice branch or FTC could sue to dam the acquisition. DOJ adverse Comcast ultimate 12 months when it desired to pay $45 billion for Time Warner Cable. however it's hard to imagine that regulators would oppose Comcast's acquisition of DWA to compete with Disney which has its own animation studio, Pixar, surprise, and Lucasfilm. If the feds reject Comcast's deal with DWA, then the cable vigor will need to pay a $200 million breakup fee.
Q: Isn't the SEC investigating DWA for its faster write-down?
A: sure. DWA says it's cooperating, but can't estimate how long the investigation will remaining, or how it may pan out.
Q: DWA has offers that could battle with Comcast's pursuits.
A: correct, however they don't look like too troublesome. DWA's movie and home video distribution take care of Fox, signed in 2012, includes a provision permitting it to terminate if there's a transformation in handle. In January, DWA multiplied its multi-12 months agreement permitting Netflix to offer its movies in the top class tv window and offering the streaming provider with long-established kids' programming. There's also Verizon's involvement with AwesomenessTV.
Q: What exactly is Comcast purchasing?
A: DWA contains 5 devices: function films accounted for approximately fifty seven% of DWA's very nearly $916 million in revenues remaining yr. television collection and Specials contributed 25%. client items kicked in a bit greater than 9%. a new Media unit, which is essentially DWA's 50.5% hobby in AwesomenessTV, provided 8%. And an different phase that comprises its live performances and licensing of its software tools become under 1%.
Q: What about Oriental DreamWorks?
A: DWA agreed in 2013 to pay $50 million for 45.5% of Oriental DreamWorks, a joint venture with China Media Capital center, Shanghai Media neighborhood, and Shanghai Alliance investment. It's designed to create content that will attraction to chinese audiences, and is run by its personal board of directors. DWA has paid $17 million of the quantity it owes with the rest due via the end of 2017.
Q: the rest at the company?A: DWA ended final yr with 2,300 personnel. Most work at its Glendale, CA campus, which incorporates 10 structures on about 14.7 acres. closing year DWA offered it for $185 million, with a 20-yr hire-back settlement. The studio pays $13.2 million a year, increasing 1.5% per yr.
Q: Does DWA have a whole lot debt?
A: yes. It owed $360 million at the conclusion of 2015. That comprises $300 million in Senior Notes due in 2020 on which it's paying 6.875% a year in interest. Moody's considers it speculative, meaning it's too dangerous for a lot of pension cash and banks to buy.
Q: Is DWA profitable?
A: now not consistently. It lost $fifty four.8 million final 12 months and $309.6 million in 2014, however made $55.1 million in 2013.
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