The talks signify the importance of content, as sales of toys driven by movies and other content grow faster than traditional toys. Fred Katayama reports.
Shrek and Fiona may have to share their forest with the Transformers and G.I. Joe in what could be a transformative deal. Media reports say the toymaker Hasbro is in talks to buy the storyteller, Dreamworks Animation. The website, Deadline, says DreamWorks wants $35 a share, a 56 percent premium. The talks signify the importance of content. Sales of toys driven by movies and other content are growing at a much faster rate than traditional toys, one reason why Hasbro keeps outperforming Mattel. Hasbro has been building content, creating its own animation studio and owning a stake in a Discovery children's cable channel. If Hasbro decides to buy content by merging with DreamWorks, Piper Jaffray senior analyst Stephanie Wissink says the toymaker could shut down its own studio, save on back office costs, lower its royalty rates, adding 32 percent to earnings. She said, "Structurally, financially, and strategically, the acquisition makes sense. But there are significant risks that would need to be considered." That risk refers to Hasbro's partnership with Disney. Hasbro makes toys like Spiderman and Star Wars under its deal with Disney's Marvel and Lucasfilm units. The last few years have been rocky for DreamWorks. Its stock had plummeted after some box office flops. So news of the talks seemed like a dream to its shareholders. DreamWorks rocketed higher at the open. Hasbro shares fell.