Comcast To Buy DreamWorks Animation For $3.8 Billion As Hollywood Consolidates

Following reports earlier this week that Comcast was in talks to purchase DreamWorks Animation , the cable giant today confirmed that it is buying the studio for $3.8 billion (equity value).

Comcast will pay $41 in per share; including debt, the deal totals $4.1 billion, which is more than Disney paid for Pixar. DreamWorks is currently Hollywood's second-smallest publicly traded company with a market cap of $3.46 billion that just exceeds Lionsgate's $3.37 billion total.

The new deal marks a deepening consolidation in the media landscape, as cable giants seek to bolster their offerings in the face of cord-cutting. Independent film companies, meanwhile, are struggling to grow their businesses away from film, to compete with franchised blockbusters that can be turned into theme park rides and lucrative merchandise. 

DreamWorks CEO Jeffrey Katzenberg will step down and become chairman of newly-formed DreamWorks New Media, which will oversee the company’s interests in the DreamWorks-owned Awesomeness TV and NOVA. He will also serve as a consultant to NBCUniversal.

The sale price-per-share marks a 27% premium over yesterday's $32.20 close price. "This agreement not only delivers significant value for our shareholders, but also supports NBCUniversal’s growing family entertainment business," said Katzenberg in a press release.

At Comcast, DreamWorks joins a theatrical division that includes Universal Pictures and Illumination Entertainment. Its addition, which includes a 32-film library of cartoon hits including Shrek, Madagascar and Kung Fu Panda, is pegged as a strategic move by NBCUniversal to expand its family entertainment spread--and compete with Disney.

Also lucrative: DreamWorks Classics, a library of classic characters including Where’s Waldo, and Rudolph the Red-Nosed Reindeer, which are ripe for expanded merchandising. These properties will also be suitable material for theme park rides--a key area of growth for entertainment conglomerates.

In a statement, NBCUniversal CEO Steve Burke suggested Illumination founder Chris Meledandri would head up the DreamWorks Animation business going forward. 

Katzenberg has been shopping DreamWorks around for years, most seriously in 2014 talks with Japan’s SoftBank Corp. and toy maker Hasbro . According to the Wall Street Journal, it more recently discussed a sale with potential buyers in China.

Intermittent success at the box office in years before 2014 while racing to grow an ancillary TV business led to DreamWorks shrinking its number of annual releases and laying off staff in 2015.

"At more than 50% above DWA's closing price in the past couple of days leading up to the initial indication of a possible deal, the purchase price seems to suggest one of the richest ever premium for a studio deal," wrote Tuna Amobi, equity analyst at S&P Global Market Intelligence, in a research note that cut the rating from a buy to a hold.

The deal is expected to close by year end, pending regulatory approval.