Stifel On Dreamworks-Comcast Merger Rumor: This Time Is Different

The Wall Street Journal (WSJ) has reported that Dreamworks Animation Skg Inc DWA and Comcast Corporation CMCSA have been in talks for the latter company to acquire the former.

Stifel’s Benjamin E. Mogil maintained a Buy rating on Dreamworks Animation, with a price target of $34.

It’s Different This Time

“While there has been speculation of DWA being a take-out candidate before, we view this time around as different as the company’s China and Television/ATV operations make it a more attractive candidate than before when it was largely a feature film business,” Mogil explained.

Mogil believes that one of the main focus areas for the purchase are Dreamworks Animation’s China operations, which Universal would be able to expand. The analyst also noted that the China operations “have favorable production/distribution treatments in place.”

The other area of focus is likely to be a strategic fit for Dreamworks Animation’s Television operations.

Television Outlook

Although the company has a multi-year output deal with several SVOD/OTT services worldwide, Mogil believes that the deal “allows for second cycle licenses to be a combination of both SVOD, VOD and traditional TV licenses.”

Although it is unclear whether the second cycle license would permit a pure VOD license, Mogil expects some flexibility regarding output on a VOD services, or an AVOD service at the very least.