Comcast is already the largest cable and internet provider in the country. Its holdings include NBC Universal and other media companies. But now, it has expanded its reach in the mass media and acquired the DreamWorks Animation Studio for more than it is actually worth.
The deal has been making waves in the business, financial, and entertainment industry for quite some time now. But it was only today that the actual announcement came down that the deal has been approved by the board of directors for both Comcast and DreamWorks, according to CNN Money.
So what’s at stake in the new deal that will benefit both Comcast and DreamWorks? For starters, the deal makes it so that Comcast isn’t just buying the animation company but rather hedging its bets that the stock will soar in the future. That means that they gave DreamWorks a premium offer, well above what the company is currently worth.
The deal itself that Comcast made for the company is $3.8 billion. To put that in a little perspective, DreamWorks Animation is worth approximately $27 per share. But with the $3.8 billion offer by Comcast to buy them out, that means they are offering around $41 per share. That means the cable and internet giant is giving them nearly 50 percent more than they are actually worth.
— CNNMoney Investing (@CNNMoneyInvest) April 28, 2016
For those who know business, especially the entertainment business, that is quite a risk to take on a company that is still far behind its closest competitor, which is Disney.
Comcast is basically looking at it as a way to take on their closest competition by giving a premium upfront investment, which shows that they are willing to really put some money into the company’s endeavors moving forward. That could also spell bad news for Disney, considering it is on top of the world right now with the acquisition of Lucasfilm and their current slate of releases within the Star Wars franchise.
I think I’d rather be choked to death by the Force instead. ‘Star Wars’ (1977) pic.twitter.com/GsBJEOJf59
— James Hancock (@colebrax) April 27, 2016
But Comcast has been one of the most aggressive media companies in recent years, swallowing up media companies one after the other. It already has a stranglehold on the domestic cable and broadband market.
For those who do not know, DreamWorks Animation is the studio responsible for some serious hits over the past several years, such as the Shrek franchise and the Kung Fu Panda franchise. Both of those will be strong placeholders for Comcast as they move forward and attempt to capitalize on their fame as well as expand on their products and bring new offerings to the animation film and TV market.
— Reuters Business (@ReutersBiz) April 28, 2016
But Comcast also has a bigger interest in what DreamWorks Animation can do for them outside of the film market. Their franchise has been firmly embedded within the merchandising and theme park sector for quite some time. Some insiders from the deal say that is what Comcast is most interested in with this new agreement moving forward.
— O V O 3♎ (@E_Savage21) April 19, 2016
This is not the first time that Comcast has tried to make major moves within the media industry in recent years. Just as recently as last year, Comcast attempted to buy up the second largest U.S. cable and internet provider, Time Warner Cable, according to the New York Times. If that deal had gone through, then there would have been no cable or internet company in the world that would have come close to the size of Comcast.
The Comcast deal to acquire Time Warner Cable was for approximately $45.2 billion, but it collapsed under the pressure of regulatory standards and public outrage.
— The New York Times (@nytimes) April 28, 2016
The current deal Comcast has with DreamWorks Animation has a $200 million opt-out clause should the cable giant go back on its word and the deal falls through. It is expected for Comcast and DreamWorks Animation to be officially merged by the end of this year.
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