SoftBank and Shrek may lack on-screen chemistry
29/09/2014 12:04
(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Una Galani
HONG KONG, Sept 29 (Reuters Breakingviews) - SoftBank's
9984.T acquisition strategy is nothing if not animated, but
it's not always easy to see a clear plot. The Japanese
conglomerate's next move could be a bid for DreamWorks Animation
DWA.O worth $3.4 billion, according to The Hollywood Reporter.
SoftBank's giant balance sheet could easily absorb the hit and
miss earnings of film production. Yet with each big buy, it
becomes less clear how the group's parts fit together.
Compared with abortive plans earlier this year to bid for
U.S. mobile carrier T-Mobile TMUS.N , a tilt at the studio that
created titles like "Shrek" and "Madagascar" looks tiny. But it
adds to a series of modestly sized deals in content, including
its recent consolidation of the world's top two mobile games
companies, Supercell and GungHo Online Entertainment 3765.T .
Talks for Vivendi's Universal Music were mooted last year but
came to naught.
DreamWorks Animation's biggest challenge as a listed company
has been lumpy earnings, thanks to a hit-and-miss pipeline of
films. While "Shrek" wowed, last year's "Turbo" was a flop.
That's where SoftBank's sheer size could be an advantage. The
reported price tag implies a premium of around one-fifth to the
animation house's current enterprise value, using a broad
interpretation of debt. Yet based on Eikon forecasts for the
current financial year, DreamWorks Animation's net loss would be
less than 0.1 percent of SoftBank's earnings.
SoftBank boss Masayoshi Son is a proven dealmaker - he
arranged a $20 million investment in Chinese e-commerce group
Alibaba BABA.N that is now worth $71 billion. That suggests
investors would be willing to give him the benefit of the doubt.
That's a good job: fellow Japanese tech giant Sony 6758.T took
a multi-billion writedown on its 1989 purchase of Columbia
Pictures.
Explaining the storyline to investors still needs thought.
SoftBank is relatively highly geared for a Japanese company at
3.1 times net debt to EBITDA, based on annualised earnings for
the first quarter. And it already has a collection of more than
1,300 stakes in companies varying from video streaming platforms
to U.S mobile carrier Sprint. Alibaba proved a good bet, but at
some point Son will have to more clearly explain his vision for
what distinguishes a smash hit from a rotten tomato.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
www.breakingviews.com/TOPNewsSubscription
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
CONTEXT NEWS
- Japan's SoftBank is in talks to acquire Hollywood studio
DreamWorks Animation, a source told Reuters on Sept. 28.
- The talks were first reported by The Hollywood Reporter,
which quoted an unidentified source saying the buyout would be
valued at $3.4 billion.
- In July, SoftBank hired former Google Executive Nikesh
Arora to run a newly created unit called SoftBank Internet and
Media.
- In August, the conglomerate dropped plans to bid for U.S.
mobile carrier T-Mobile after regulators expressed concerns
about further consolidation in the industry.
-Chairman and Chief Executive Masayoshi Son owned 19.26
percent of SoftBank as of March 31, 2014.
- Reuters: Japan's SoftBank in talks to buy DreamWorks
ID:nL2N0RT05R
RELATED COLUMNS
Soft-value ID:nL3N0RN19H
Setting Son ID:nL4N0QC0G3
- For previous columns by the author, Reuters customers can
click on GALANI/
(Editing by John Foley and Carol Ryan; https://twitter.com/ugalani)
((una.galani@thomsonreuters.com Reuters messaging:
una.galani.thomsonreuters.com@reuters.net))
Keywords: BREAKINGVIEWS SOFTBANK/DREAMWORKS