Does A SoftBank-DreamWorks Animation Skg Inc Merger Make Any Sense?

SoftBank SFTBF, a Japanese telecommunications company, is reportedly in talks with DreamWorks Animation Skg Inc DWA about a possible merger.

The deal (which is valued at $32 per share, or $3.4 billion) was originally reported by The Hollywood Reporter. A later report by Variety claims the two companies are in contact but said the deal is unlikely to happen.

That has not deterred investors, however. Shares of DreamWorks were up nearly 30 percent early Monday.

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No Synergies Present

Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, questioned the merger's relevancy.

"I don't get it," Moorhead told Benzinga. "I don't get the value add that Softbank brings to the table globally. It just seems like kind of a conglomerate, an interesting thing for it to go off and buy. These guys are telecom. I admire pipes companies buying content, but I do not see the synergy here."

DreamWorks has endured numerous box office disappointments over the past few years. Moorhead doesn't have much hope for the company's future if it is sold to SoftBank.

"I don't see any synergy they would bring, so I guess I would expect DreamWorks to be pounded into nothingness over time," said Moorhead. "I don't see the value add. I expect SoftBank to pull back investment and be a more conservative company as it relates to movies and different projects."

Hard Struggles

Brett Golden, president and co-founder of The Chart Lab (a provider of quantitative advice solutions for retail and institutional investors), also has doubts about the merger.

"They've been struggling very hard," said Golden. "I think DreamWorks has been a real disappointment for everybody involved."

DreamWorks could turn things around with a few home runs, but the company won't release its next film, "Penguins of Madagascar," for more than a month. Its last film, "How To Train Your Dragon 2," was released in June.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.