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SoftBank Talking Acquisition of DreamWorks

softbankChief executive, Masayoshi Son, of telecom giant SoftBank (TYO) in Japan is reportedly in discussions to acquire DreamWorks Animation (DWA O), the Hollywood studio responsible for creating animated classics and films like “Madagascar”, “Shrek”, and “How to Train your Dragon”.

An earlier deal to bid on T-Mobile US Inc. (TMUS), combining it with Sprint Corp. (S), fell through when Son failed to overcome regulators’ skepticism. Now, Japan’s billionaire is turning to opportunities in Hollywood. A deal with DreamWorks would open doors for Son to move toward his ambition of challenging the two largest mobile companies in the US, Verizon Communications (VZ) and AT&T (T).

Adding DreamWorks to a list of other content providers recently purchased by Son is a part of the plan to differentiate SoftBank with extensive exclusive content. Reportedly DreamWorks has market capitalization of approximately $2 billion but no actual bidding price has been revealed.

Stock for DreamWorks Animation has experienced highs and lows primarily because of box-office performance of feature films ever since DreamWorks SKG spun off in 2004. Share price has been heavily impacted due to a string of disappointments and to assure investors that stock price will be less reliant on the few feature films released each year, chief executive Jeffrey Katzenberg is working hard.

During a recent presentation to investors, Son stated he wanted to increase market capitalization from $90 billion to around $2.6 trillion by 2040, this after previously saying he wanted to make SoftBank the largest company in the world and that his ultimate goal is to build a company that will last 300 years.

SoftBank is looking at a gain of $5 billion from Son’s 32% stake in Alibaba Group Holding, Ltd (BABA), whose stock skyrocketed on debut. In addition to this company, SoftBank has investments in more than 1,300 companies in all. SoftBank has also targeted several companies like Vodafone Group PLC (VOD) and Yahoo (YHOO), among others. However, his associates confirm the focus remains on growth potential with the US market and specifically, expanding the company’s media content portfolio.

To help, Nikesh Arora, a top executive, was hired from Google (GOOG), which played a vital role in growing Google’s search advertising business. In August, SoftBank acquired control of Supercell, which created mobile games like “Hay Day” and “Clash of Clans”, by purchasing stake owned by GungHo Online Entertainment but when Vivendi SA (VIV) approached in 2013 regarding the purchase of Universal Music Group, the offer was rejected.

According to App Annie research firm, SoftBank’s investments in games have made the company the biggest player in a fast-growing media business. However what is still unclear is whether that provides another revenue stream and profits for the company or if somehow, the gaming businesses can boost SoftBank’s cellular network.

A deal with DreamWorks Animation would also help expand SoftBank in Asia because two years ago, the company joined a number of investment companies in China to establish a studio aimed at animated and action films for global audiences.

During the 1980s, Japanese investors were aggressively buying Hollywood companies such as Columbia Pictures (COLP) and MCA (MCA), which was acquired by Matsushita Electric Industrial Co., now known as Panasonic Corp. (PCRFY).

DreamWorks Animation may be a small studio but it offers a high profile and has produced some of the biggest hits in all of animation history. For SoftBank, it could be the ticket to allowing Son to achieve his goal.

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