Saturday, July 21, 2012

Will Dreamworks Animation Win in its Bid for Classic Media?

On Wednesday, I reported that Dreamworks Animation (DWA) was set to acquire Classic Media. Classic Media is the owner of a large library of cartoon characters. Some of these characters have been turned into television shows or movies. No official decision has been made by either Dreamworks Animation or Classic Media.

The key brands owned by Classic Media include:

  • Archie
  • Casper the Friendly Ghost
  • Dick Tracy
  • Frosty the Snowman
  • George of the Jungle
  • Godzilla
  • Gumby
  • He-Man
  • Lassie
  • The Lone Ranger
  • Rocky & Bullwinkle
  • Rudolph
  • Veggie Tales
  • Where's Waldo
The big reason for the buyout is licensing power from Dreamworks Animation. Cinema Blend reported that Classic Media made $376 million in licensing revenue last year. Dreamworks is reportedly buying Classic Media for a low price tag of $150 million. With that low buyout offer, why hasn't another acquirer emerged? Are the brands too low quality for Disney (DIS) or another movie studio to get involved? Why no Iconix Brands (ICON), a company that owns brands normally licensed to clothing companies? I recommended Iconix back in an October article.

Dreamworks Animation has already announced it will be making a movie based on Classic Media characters Mr. Peabody & Sherman. The Mr. Peabody & Sherman movie is set to be released in 2014. Rob Minkoff (Lion King) will write and direct the animated movie. Ty Burrell (from Modern Family) and Max Charles (young Peter Parker in the newest Spider Man) are set to play the title characters. Surely, Dreamworks didn't pay $150 million just to gain the Mr. Peabody & Sherman brand.

I also discussed in the above article that Dreamworks Animation could be making the acquisition of Classic Media to help boost its character offerings at its recently announced theme park launch.

An official announcement should come this week as to who will own Classic Media. When that announcement is made, Dreamworks should see a nice bump in share price and could pick up some analysts upgrades.

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