Wednesday, April 06, 2016

Corporate Purchases

Now with Add On!

From the usual press release:

Verizon today announced it has entered into an agreement to purchase an approximate 24.5% stake in AwesomenessTV (the "Company"). Upon completion of this transaction, the AwesomenessTV multi-platform media company will be valued at approximately $650 million. DreamWorks Animation , which acquired AwesomenessTV in 2013, will remain the Company's majority stakeholder with an approximate 51% ownership of outstanding shares, while Hearst will own the remaining 24.5%.

Brian Robbins, AwesomenessTV founder and CEO, and Brett Bouttier, AwesomenessTV's president, will continue to lead the Company.

In addition to its equity investment, Verizon will enter into an agreement with AwesomenessTV to create a first-of-its-kind premium short-form mobile video service featuring leading talent in front of and behind the camera. The new service will operate as a new and independent brand, and feature premium transactional content for a variety of audiences on par with the highest-end content seen on television today. The new service will launch as part of the go90 offering and Verizon will fund the initiative through a multi-year agreement with AwesomenessTV. ...

So Verizon shelled out $160 million for its 24.5% stake, which makes Awesomeness worth (give or take) $650 million in cold, hard cash. Not bad for a company that launched two years and ten months ago on YouTube.

For Verizon, the company is looking to get into mobile video to increase revenues and profits. It looks like DreamWorks Animation's acquisition of Awesomeness all those months ago was a smart, smart move. The investment has only gone up in value, and it helps DWA diversify its business model. No longer can we say "DreamWorks Animation? It's kind of like Pixar, innit? Makes animated features."

It's now considerably more than that, which is a good thing, if it's to survive as a stand-alone company. (Of course, Jeffrey probably wants to make DreamWorks a subsidiary of one of our fine, entertainment conglomerates; the question is, which conglomerate will meet his price?)

Add On: Per Seeking Alpha, DWA's diversification efforts are building value for the company:

The Verizon deal helps to show how ridiculously undervalued DreamWorks Animation really is at a market cap of $2.1 billion. This deal values Awesomeness TV at $650 million. DreamWorks owns half which is worth $325 million. It just sold ¼ for which it should receive $162.5 million. You could argue Verizon probably got a good deal as DreamWorks is getting strategic partners on board in order to turbocharge growth here. To keep it simple, I'll just take the face value adding up to $485.5 million.

There are several other assets within the DreamWorks organisation that are fairly easy to value on an asset basis. DreamWorks has a 64% stake in Nova worth $80 million. It has $110 million in cash and equivalents and is owed $500 million worth of receivables. Feature movies in development are put in inventory at cost. Inventory is worth $800 million (I think it's fair to value these at cost). Not long ago, the firm bought the classic media library for $155 million. So far the easy part. If I add it all up, and subtract the total of liabilities, it comes out to $1.35 billion.

A valuable part of DreamWorks we have ignored is its library segment. This is where DreamWorks recognizes revenue from older feature movies. Depending on how far they are amortized, this revenue comes at great or incredibly high margins. ...


Site Meter