NBCUniversal's DreamWorks Animation Bid Gets DoJ Nod

As per a recent Bloomberg report, Comcast Corporation (NASDAQ:CMCSA) -owned NBCUniversal revealed that its acquisition proposal for DreamWorks Animation SKG Inc. (NASDAQ:DWA) has received a go-ahead from the U.S. Department of Justice (DoJ). This April, NBCUniversal announced that it will purchase DreamWorks Animation for $3.8 billion, contingent upon the DoJ approval.

The Story So Far

Volatility in the movie business, rising marketing expenses and a lower number of movie releases have been resulting in persistent losses for DreamWorks. Also, unlike Viacom Inc. (NASDAQ:VIAB) , DreamWorks lacks business diversification with the company’s Feature Film segment contributing to more than half of its total revenue. This segment put up a dismal performance in the first quarter of 2016, wherein its revenues tanked 26.7%.

Recent Alliances

DreamWorks’ AwesomenessTV has an agreement with Alphabet (NASDAQ:GOOGL) Inc. under which can release several feature films on the video-sharing site, YouTube, over the next two years. DreamWorks has also strengthened its multi-year global licensing deal with Netflix Inc (NASDAQ:NFLX)., which covers the production of a number of new original series. We believe that such partnerships will drive DreamWork’s top line and will also create significant revenue synergies for NBCUniversal in the days to come.

The Bottom Line

Having acquired the entire stake in NBCUniversal from General Electric Company (NYSE:GE), Comcast is determined to leave no stone unturned in revamping Universal Pictures. Primarily aimed to tackle intensifying competitive pressure from The Walt Disney Company (NYSE:DIS) , the DreamWorks Animation takeover should prove to be a strategic move. It is also expected to generate a substantial amount of cost savings and will create revenue growth opportunities, going ahead.

Both DreamWorks Animation and Comcast currently carry a Zacks Rank #3 (Hold).