Dreamwork Animation’s Valuation Spurs Interest In Lions Gate, Paramount

By Joe Nichols

Apr 30, 2016 06:43 AM EDT

The attractive price Comcast offered to buy DreamWorks Animation has encouraged rumors that Viacom may be in for a larger-than-expected payoff for the purchase of its minority stake in Paramount Pictures.

This deal which was disclosed on Thursday has also fanned speculation that Lions Gate Entertainment might finalize its merger with Starz.

Shares of Starz, the premium cable-TV network soared after a report from RBC Capital Markets hinted that the two firms with connections to media mogul John Malone are also near to a merger. Its shares gained 8.5 percent to $26.92.

As for the valuation of a possible deal, Comcast agreed to pay $41 per share for DreamWorks, a price premium of 51 percent, where the stock was trading before the merger negotiations was disclosed to the public on Thursday.

The brightest prospect for a post-DreamWorks merger sweepstakes belongs to Philippe Dauman, CEO of Viacom. He has been embroiled in issues concerning the health and welfare of Sumner Redstone, one of the company's shareholders.

This company is struggling to reverse its dwindling advertising sales, the same with its cable-TV network Nickleodeon and MTV.

Another analyst believes that the Comcast-DreamWorks deal may be more reckless than tactical.

Doug Creutz, a media analyst at Cowen & Co., is not all-positive on the glitzy Hollywood merger. He said that once the deal is closed, NBC Universal, Comcast's entertainment division, will have in its hands, a comparatively small animation movie making company.

Creutz believes that it can't stand the fight against bigger animation studios such as Disney Movies and others.

But Dauman sounded optimistic. After an investor conference call on Thursday announcing the acquisition of DreamWorks, he said he will also get a rich valuation for a minority stake in Paramount, a much bigger studio which has recently produced "The Big Short."

"Well, I think it shows the value," Dauman said. "There is strong interest from around the world and we think at this stage based on the conversations that I have had, that we will have a compelling result."