UPDATE: SoftBank Corp (TYO:9984)’s May Not Buy DreamWorks Animation SKG Inc (NASDAQ:DWA)

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Shortly after news of discussion between Softbank Corp (TYO: 9984) and DreamWorks Animation SKG Inc (NASDAQ:DWA) emerged, people familiar with the matter said that the discussions between the two companies have slowed down. The original news was about Japanese company Softbank acquiring or partnering with American Hollywood studio DreamWorks Animation.

It was not initially clear what had happened between when the talks were first starting to get under way and today. It is still possible that negotiations would start up again. The two companies could also end up striking a deal besides an outright buyout, such as a content partnership.

The shares of DreamWorks jumped up on the news of the initial report, going up by 26 percent yesterday. This valued the market capitalization of the company at more than $2 billion. However, right after the news of the talks slowing down hit the public, the company’s shares dropped by more than 8 percent from the closing price of Monday. The discussions between Softbank and DreamWorks followed two months after the Japanese based company gave up on a bid for T-Mobile (NYSE:TMUS).

DreamWorks is led by Jeffrey Katzenberg, a former Hollywood executive. Under his leadership DreamWorks has produced animation hits such as “Shrek” and “Madagascar”. However, the studio’s most recent productions, namely “Turbo” and “Rise of the Guardians” showed disappointing performances at the box office, dragging down the stock price of the company.

The possibility of a takeover gave DreamWorks its most notable increase in stock price since its stock price fell following the release of disappointing results for its second quarter in July. The studio company, located in Glendale, Calfornia, saw a loss of $15.4 million on $122.3 million in revenue during its second quarter.

Stock analyst at B. Riley, Erik Wold, said that the Japanese company is likely interested in DreamWorks because the company has a much lower valuation than other content creators, but also holds a valuable collection of content and character franchise. Additionally, the Japanese telecommunications firm could be searching for new methods to obtain content from DreamWorks’s YouTube company, AwesomenessTV, which is oriented towards youths and a younger demographic.

DreamWorks Animation purchased AwesomenessTV back in May of 2013 for an initial price of $33 million. This purchase is one of multiple recent acquisitions as a part of a plan to diversify the company’s business and expand its operations into online content, television, and consumer products. The Hollywood studio typically releases two or three films in a year, a system that forces the company to produce a consistent stream of well-performing hits to maintain its stock price where it is.

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