Hasbro ends talks on buying DreamWorks Animation

A marriage between Shrek and G.I. Joe may not be in the stars after all.

Toy giant Hasbro Inc. has decided to halt talks to acquire DreamWorks Animation SKG Inc., two people familiar with the matter said late Friday.

The turnaround comes only one day after reports about a possible merger between the world's second-largest toy maker and the Glendale studio behind “Shrek,” “Kung Fu Panda” and “Madagascar” movies.

Hasbro's change of heart came after investors reacted negatively the last two days to the prospect of a deal. Some analysts openly questioned why the toy giant was wading more heavily into the volatile movie business and partnering with a studio that has struggled of late at the box office.

Shares of the Pawtucket, R.I., toy maker dropped 4.3% Thursday and fell 1.7% more, or 96 cents, Friday, to $54.02.

DreamWorks shares, meanwhile, soared 14% on Thursday and added 50 cents more, or 2%, Friday, to $26.02. But shares dropped nearly 10% in after-hours trading.

Beyond Wall Street's negative reaction, the two sides also couldn't agree on a price, said the people, who did not want their names disclosed because they were not authorized to discuss the negotiations.

DreamWorks Animation Chief Executive Jeffrey Katzenberg had been seeking more than $30 a share, considered a high premium for a company valued at $2.2 billion.

Representatives of DreamWorks and Hasbro declined to comment.

A collapse in talks with Hasbro would be a further blow to Katzenberg, who unsuccessfully attempted in September to sell his studio to Japanese telecommunications company SoftBank.

Twitter: @rverrier

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