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DreamWorks Animation Sale to Hasbro Hinges on Control, Price

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November 13, 2014 4:31PM PT DreamWorks Animation Sale to Hasbro Hinges on Control, Price

By Marc Graser

@marcgraser

Marc Graser Senior Editor @marcgraser

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Brian Goldner Jeffrey Katzenberg Hasbro Dreamworks Battle

Can the heads of Hasbro and DreamWorks Animation find a way to play nice together?

Both Hasbro chief Brian Goldner and DWA founder Jeffery Katzenberg are tough negotiators, and willful individuals who are used to running their own shows. So one of the open questions about a potential merger of their companies is whether the two CEOs can come to terms on operational control of the new entity. It’s impossible to imagine Katzenberg reporting to Goldner (or vice versa), even though Hasbro would be acquiring DWA.

Of course, the other big question is whether the executives can agree on a price.

Katzenberg is naturally looking to get the best deal for DWA, and is said to be asking Hasbro to pay more than $30 a share for the company in a deal that could be worth at least $2.3 billion. (Japan’s SoftBank is said to have recently offered $32 a share, or $3.4 billion, for DWA in September).

DWA’s stock closed at $22.37 on Wednesday, on the day its discussions with Hasbro were first revealed. At the time, DWA was valued at $1.9 billion, while Hasbro’s net worth is $7.2 billion. On Thursday, DWA stock shot up 14% to close at $3.15, while Hasbro fell 4% to end at $54.98.

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The high cost of acquiring DWA — and Katzenberg’s desire to remain in control — is what eventually sunk previous negotiations with potential buyers. Similar deal points could prove a sticking point this time around, too.

“Katzenberg, we believe, has a constructive view of DWA’s value, which can make it hard for the seller and buyer to agree on pricing,” FBR Capital Markets said Thursday in a report analyzing a potential deal.

In his talks with Goldner, Katzenberg is dealing with an executive who has had his sights set on Hollywood ever since taking over as CEO of Hasbro in 2008.

Goldner was instrumental in reviving the toymaker’s top brands — including Transformers and G.I. Joe — through films and TV shows. Now he sees DWA as a way to buy a toon studio through which he can make feature-length movies starring Hasbro’s characters (it recently announced a “My Little Pony” film), but also add more popular brands to the toymaker’s portfolio; lucrative distribution deals with Netflix and teen and tween-targeted entertainment network AwesomenessTV; as well as a theme park presence in growing markets like China and Russia. DWA also is now producing original features in China through its 49% stake in Oriental DreamWorks.

Historically, Hasbro hasn’t been keen on using acquisitions as a way to grow its bottomline. Instead, the company has focused on expanding into new overseas markets like China, Russia, Korea, Colombia and Brazil as a cornerstone of growth.

Film and television, however, is another key growth strategy.

Goldner, 51, is a fiercely competitive executive who has recently moved pieces around the board to expand Hasbro’s efforts on all screens, recently promoting Stephen Davis from Hasbro Studios president to chief content officer.

He also announced Allspark Pictures as a new film label within Hasbro Studios to take more creative and financial control over how its brands play out on the big and small screens. The first projects to be produced through the shingle include a live action “Jem and the Holograms” movie, produced with Jason Blum, and the “Pony” pic. “Transformers” and “G.I. Joe” are set up at Paramount, while “Candy Land” is at Sony. Fox has “Magic: The Gathering.” Universal recently released “Ouija,” a $5 million budgeted thriller that’s earned $58 million since Oct. 24.

He’s a regular in Hollywood, meeting with partners that include Disney and Electronic Arts, distribution partners like Paramount and Universal, but also showing up at each of his films’ premieres, flying in from Hasbro’s headquarters in Pawtucket, Rhode Island. He has strong ties to filmmakers including Steven Spielberg and Lorenzo di Bonaventura. Hasbro also produces the toys for Marvel’s superhero films, Lucasfilm’s “Star Wars” films, Paramount’s “Star Trek,” and Rovio’s “Angry Birds.” It recently took Disney’s Princesses away from rival Mattel in a new deal that starts in 2016, as part of a deal that also lets it create toys tied to “Frozen.”

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