Hasbro-DreamWorks Merger Is 'Interesting' And 'Irrational'

Investors are definitely intrigued by the rumor that Hasbro, Inc. HAS and DreamWorks Animation Skg Inc DWA will merge.

As of this writing, shares of DreamWorks were up more than 11 percent. Hasbro, however, was trading down more than 4 percent.

"Obviously [CEO Jeffrey] Katzenberg has been shopping his company for a while," B Riley analyst Eric Wold told Benzinga. "Clearly he wants to sell it. I think there's some interesting tie-ups between Hasbro and DreamWorks. The question in my mind is, how much can they get from each other?"

The answer could be limited. Many of Hasbro's key properties -- including Transformers and G.I. Joe -- are already in the hands of major movie studios.

"It's tough to know what they actually get out of it but it is somewhat interesting," Wold added. "I continue to believe that DreamWorks has very valuable content and libraries that are underappreciated by the market given the number of flops they've had recently."

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

'No Sense'

Sterne Agee analyst Vasily Karasyov isn't a fan of the rumored merger.

"It makes no sense," Karasyov told Benzinga. "You can't have a rational conversation about something that's irrational. It makes no sense for a toymaker to buy a struggling animation studio, especially given [that] all their properties are licensed out."

Instead of buying an ailing animation studio, Karasyov -- who covers DreamWorks but not Hasbro -- thinks the company should consider making movies in-house or continue licensing them out.

'No Financial Risk'

There isn't much to worry about if DreamWorks can't find a buyer.

"They're in no financial risk," said Wold. "It's not like they need to sell to survive. I think Katzenberg believes his company is worth more than it is in the public market and is overly scrutinized by the headlines of film releases. If you're private you can maybe hunker back and not rush to put out three movies a year to satisfy the Street."

If DreamWorks remains a standalone company, Wold said that it will have to "keep plugging along and hope [it gets] back to movies that make money."

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