How the Comcast-DreamWorks deal came together so fast


The rumor made its way from Hollywood to Comcast Corp. headquarters in Philadelphia: Jeffrey Katzenberg was about to take DreamWorks Animation private with the help of a Chinese investor.

Hearing the news, Comcast Chief Executive Brian Roberts immediately called a top lieutenant, NBCUniversal Chief Executive Steve Burke, to form a plan. Roberts then called Katzenberg, who was blunt: Was Comcast prepared to pay more than the undisclosed Chinese investor?

Roberts, Burke and other senior Comcast executives hopped on the corporate jet to Los Angeles the next day — Friday, April 15. Over the weekend, Katzenberg treated the executives to breakfast at his Beverly Hills home and took them on a private tour of DreamWorks Animation’s Tuscan-style campus in Glendale. Lawyers in downtown Los Angeles guided them through the financials.


A deal would come together with lightning speed. At about 5 a.m. Thursday, Comcast agreed to acquire DreamWorks Animation for $3.8 billion, one of the largest acquisitions of a film studio in the last decade.

“We’ve thought about what we could do if we put DreamWorks together with NBCUniversal for years, but it was never clearly available,” Burke said in an interview with The Times.

For several years, NBCUniversal executives had made subtle overtures, but the sticking point always had been that Katzenberg didn’t want to give up control of the company that he built from scratch.

The purchase, which is subject to regulatory approvals, marks the end of an era for DreamWorks Animation and its founder, Katzenberg, who finally is relinquishing control. DreamWorks Animation will be folded into the larger Universal Filmed Entertainment Group and overseen by Chris Meledandri, the founder and CEO of Universal’s successful stand-alone animation studio, Illumination Entertainment.

“It helps us accomplish a lot of the things that we were already doing, and it allows us to get bigger in areas where we wanted to grow,” Burke said.

Katzenberg still wasn’t looking to sell the entire company, according to two people familiar with his thinking, but he also recognized that he might have taken the independent studio as far as he could — and Comcast’s offer was too lucrative to pass up.

“This was not a deal that we needed to do, but it’s the deal I’d always hoped would come along,” Katzenberg told his employees during a meeting Thursday morning. “Not only are we passing the baton to a company that understands and values our brand, but it’s also a place that will nurture and grow our businesses.”

Under terms of the agreement, Comcast will pay DreamWorks Animation shareholders $41 in cash for each DreamWorks share — a significant premium over the company’s trading levels in recent years. The purchase is expected to close later this year.

NBCUniversal, which Comcast acquired five years ago from General Electric, was most intrigued by the popularity of DreamWorks Animation’s creations, including “Shrek,” “Kung Fu Panda,” “Madagascar” and “How to Train Your Dragon.”

Those properties have enormous value, including for NBCUniversal’s growing Universal Studios theme park unit. Comcast and several Chinese partners are building a more than $3-billion theme park near Beijing.

Comcast stands to benefit from the ties DreamWorks Animation has already established in China, the world’s second-largest film market. DreamWorks Animation operates a production studio in Shanghai through a joint venture with Chinese media companies.

The company will be able to make the “Kung Fu Panda” bears into furry stars at the Chinese theme park, which is expected to open in 2019. NBCUniversal’s park designers also can create new and bolder “Shrek” attractions for its theme parks in Orlando and Los Angeles.

“From our perspective [this deal] is more trying to plug a potential hole in Comcast’s portfolio,” said Tuna Amobi, an analyst for S&P Capital IQ. “Comcast has had some successes with Illumination [but] a deal for DreamWorks would make Comcast a much more formidable player.”

NBCUniversal also was drawn by DreamWorks’ vibrant TV operation, which has churned out hundreds of hours of animated family entertainment. The studio has a thriving partnership with global streaming service Netflix that was recently expanded.

“This gives us a wealth of great iconic characters and stories that we can tell,” said Jeff Shell, chairman of Universal Filmed Entertainment, and one of the six Comcast executives who struck the deal with Katzenberg. “Between their consumer products division, and ours, we can create an operation with great scale. And this also gives us a TV operation, which we did not have.”

Katzenberg declined to comment.

Comcast recognizes the growing importance of family programming.

What’s more, the appeal of animated characters is ageless and global — an increasingly important factor as Hollywood relies more heavily on foreign territories for ticket and merchandise sales.

In addition to its stable of recent animation hits, DreamWorks also had amassed a library of classic characters, including “Where’s Waldo,” and “Rudolph the Red-Nosed Reindeer.”

Even though Comcast paid a high price for DreamWorks Animation, and the studio’s track record in recent years has been mixed, Burke said he expects the acquisition will pay off.

“We think the company will be significantly more profitable when we combine it with NBCUniversal,” Burke said. “There are enough synergies that we feel that we paid a very fair price.”

Investors cheered the news.

DreamWorks Animation shares surged $7.75, or 24%, to $39.95 in Thursday trading on Wall Street in response to the hefty premium. Comcast’s offer of $41 a share represents the highest level for DreamWorks’ stock since 2010. Comcast shares were little-changed Thursday, falling 15 cents to $61.15, reflecting the small size of the acquisition relative to Comcast’s vast holdings.

Comcast was advised by Davis Polk & Wardwell on legal matters involving the proposed acquisition. DreamWorks Animation’s financial advisor was Centerview Partners, and its legal matters were handled by Cravath, Swaine & Moore. In addition, DreamWorks Animation’s board was advised on legal matters by Munger Tolles & Olson.

“We’re builders and we are investing in these businesses,” Burke said. “The media landscape is changing, but the one thing we know for sure is that people love good stories. They love going to the movies, going to theme parks and buying consumer products. We are investing in these businesses because we believe in them.”

Times staff writers Daniel Miller and Ryan Faughnder contributed to this report.


Katzenberg to relinquish DreamWorks Animation CEO role after Comcast deal

DreamWorks Animation shares soar on Comcast deal talks

Chris Meledandri of Illumination Entertainment to oversee DreamWorks Animation