Now that Disney (DIS) plans to buy Marvel (MVL) for $4 billion, some large entertainment company or foreign studio is bound to buy DreamWorks Animation somewhere above $38 per share, writes Goldman Sachs analyst Ingrid Chung.
We believe that today’s announcement highlights the strategic value of key brands and pure play content companies with established franchises to large entertainment companies.
We did not view Disney a potential acquirer of DreamWorks Animation given its Pixar acquisition, but we continue to believe that DreamWorks Animation would be attractive to other large entertainment companies (or a foreign studio) without CGI animation capabilities given (1) CGI films generate higher returns and more consistent profits; (2) the franchise value of DreamWorks Animation’s content would fit well with a conglomerate, which could leverage DWA’s content over multiple platforms; (3) DreamWorks Animation’s relatively small size and clean balance sheet; and (4) lack of regulatory hurdles. We introduce our 2010 quarterly EPS estimates of $0.25, $0.44, $0.46, $1.17.
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