DWA-Aardman deal flushed


LONDON -- Ending months of industry speculation, DreamWorks Animation and U.K.-based Aardman Animations said Tuesday that they are formally ending their working relationship after more than five years.

Sources close to Aardman, home of Oscar-winning animator Nick Park, said the British claymation stable is putting together an alternative arrangement at another studio, details of which will be unveiled in the coming weeks.

The parting of the ways comes on the heels of disappointing boxoffice for Aardman's nonmodel CGI creation "Flushed Away," which failed to catch on in theaters on either side of the pond. It has grossed about $62 million in the U.S. since its November release and £10 million in the U.K. since its early December bow.

The five-picture deal between the companies resulted in three titles: "Chicken Run," "Wallace & Gromit: The Curse of the Were-Rabbit" (which won the 2006 Oscar for best animated feature) and "Flushed Away." It also famously saw the two butt heads over the script for "The Tortoise and the Hare," a 3-D claymation project.

An Aardman spokesman noted that "the DreamWorks business model has changed" since the Bristol-based toon house sealed its deal with the studio.

The source said DreamWorks "is now dedicated to making two CG movies a year, and we (at Aardman) want to and will continue to make 3-D model movies."

Merrill Lynch analyst Jessica Reif Cohen reiterated her "buy" recommendation on DWA stock even while estimating that the company will take at least a $105 million write-down related to "Flushed Away." DWA took a $29 million write-down for "Wallace & Gromit."

"The poor performance of 'Flushed Away' at the boxoffice suggests recouping all costs associated with the film is unlikely," the analyst said.

The analyst said "Flushed Away" generated $171 million in worldwide boxoffice receipts, compared with $192 million for "Wallace & Gromit."

Reif Cohen also slashed her DVD projection for "Flushed Away," predicting that it will sell 8.5 million units compared with her previous guess of 15 million.

"The write-down of 'Flushed Away' had little effect on our 2007 earnings-per-share estimates, as we had previously expected the film would essentially break even and it therefore contributed little to gross profit," she said.

The analyst has a $31 price target on shares, saying the company will benefit from "Shrek the Third" and "a much stronger slate over the next two years." Shares of DWA rose a penny Tuesday to $28.22.

DWA chief executive Jeffrey Katzenberg said after "Wallace and Gromit" results came in that the Aardman relationship might be in trouble, though he praised the company for making movies that audiences enjoyed, albeit in smaller numbers than anticipated.

He reiterated that sentiment Tuesday, saying that he admires "Aardman's passion and expertise for stop-motion filmmaking and brilliant storytelling," but that DWA has a full slate into 2010.

"Our different business goals no longer support each other," he said.