Inside SoftBank's Studio Grab: Is a DreamWorks Deal Really Dead?

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Japan's richest man begins a Hollywood courtship as Jeffrey Katzenberg floats a $4 billion sale to Rupert Murdoch, Legendary seeks an investor and everyone wonders what big deal is next

A version of this story first appeared in the Oct. 10 issue of The Hollywood Reporter magazine.

Is the SoftBank bid to buy DreamWorks Animation dead or just resting?

Neither side is talking. But those talks, plus news that SoftBank is planning a significant investment in Thomas Tull's Legendary Pictures — coming a week after China's Fosun Group announced a $200 million stake in former Warner Bros. chief Jeff Robinov's Studio 8 — underscore that the courtship between Hollywood and deep-pocketed Asian investors is heating up. And SoftBank's U.C. Berkeley-educated founder and CEO, Masayoshi Son — the richest man in Japan — only seems to have begun to shop.

It's still not clear what killed the SoftBank acquisition of DWA, which multiple sources believe was well along when THR revealed the talks Sept. 27. Sources say DWA CEO Jeffrey Katzenberg had made an unsuccessful appeal to Rupert Murdoch to buy the company for about $4 billion — a number that long has been Katzenberg's target. (A Murdoch rep and DWA declined comment.)

"Jeffrey's overplaying his hand," says one observer, who, like many, is surprised that DWA hasn't closed the SoftBank deal. "I would have jumped all over it. He could claim victory, get his $3 billion and work his way into Masayoshi Son's ear to buy other stuff."

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Industry sources say SoftBank may have been spooked by DWA's failure to embrace its $32-a-share offer — a premium given that DWA stock was at $22 a share. Then there was the media attention and a strong market reaction to a possible deal as SoftBank shares dropped 1 percent while DWA's soared 26 percent to $28.18 on Sept. 29 before falling again.

But several industry veterans think a deal still could happen. "They have to pause before they renegotiate," says the head of one film company not involved in the deal but with extensive Asia experience. With the market reaction, he says, "The economics of the deal changed dramatically."

If the deal is dead, observers assume Katzenberg, 63, will continue his quest to sell. The DWA chief is known to be weary of watching his stock rise and fall based on the performance of a couple theatrical releases a year. He has been working to make his company more diverse and presumably more appealing to prospective buyers.

In May 2013, DWA paid $33 million for YouTube teen network AwesomenessTV. The following month, it announced a pact to create TV series for Netflix. In February, DWA did a deal with Merlin Entertainments, the world's second-largest visitor-attraction operator, to open "adventures" featuring characters from Shrek; the first is set to open in 2015 in London. The company also launched DreamWorks Press to publish books based on its library. In June, it revealed another YouTube channel: DreamWorksTV, to be overseen by AwesomenessTV founder Brian Robbins. And in July, DWA said it will adorn Shrek with a Santa hat by way of DreamPlace, which puts holiday installations in retail spaces.

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An industry insider says Katzenberg is laboring under constraints he would like to shed. "He'd be happy to not be in a public-entity construct," he says. "It's hard to diversify at lightning speed, like he wants to, with the scrutiny of being a public company and with the volatility of [film] release after release, up and down." It would be better to become a smaller cog in a firm so big that DWA "gets hidden and essentially becomes a private company." And in the process, Katzenberg could gain "a deep-pocketed partner and owner who wants to go long."

But a source familiar with Katzenberg's thinking says his deals to diversify — with the exception of the Netflix pact — are beside the point. "Jeffrey's bored," he says. But no new opportunity is on the horizon, so one source with ties to SoftBank believes the deal could be revived. He notes that Son "controls the company, and he can do whatever he wants. The deal could be dead today and come back alive in two months." With an estimated net worth of $16.6 billion, Son, 57, is known as a gambler: In 2010, he outlined a 300-year plan that included the goal of investing in 5,000 companies by 2040.

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Meanwhile, Katzenberg is networking. On Sept. 23, he was seen leading Fosun chairman Guo Guangchang and a top exec from China's Bona Film Group (in which Fosun holds a stake) around the DWA campus. Two days later, Guo said he had no plans to invest beyond Studio 8. But that hasn't stopped speculation that Fosun wants to buy — along with SoftBank and other Asian companies.

Some believe one or more of these buyers has an eye on Sony's entertainment operations, though Sony CEO Kazuo Hirai has maintained that his company isn't selling.

Gerhard Fasol, CEO of Tokyo-based boutique consultancy Eurotechnology-Japan and longtime SoftBank watcher, says he doesn't know whether SoftBank would return to the negotiating table with DWA, but he doesn't rule it out. "It's obvious that they're looking for content; they tried to buy Universal Music, but that fell through," he says, adding that Son is known as someone with an almost unbreakable will in pursuing his goals. Fasol recalls a legendary incident during the SoftBank CEO's battle with regulators in 2001 as he was establishing his presence in the broadband market. “He walked into the communications ministry and threatened to set himself on fire unless he got what he wanted," says Fasol.

Fasol believes Son will eventually succeed in a major content acquisition. "He has, like, a secret antenna for these things," he says. “He's been told he's overpaid for companies many times, but he's been proved right nearly every time in the end. An accountant might look at the figures and say it's overpriced by 10 percent, but he has a different vision."

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