DreamWorks Rallies On Reports Of Potential Takeover, Sterne Agee Skeptical

NEW YORK (TheStreet) -- Shares of animated movie maker DreamWorks Animation (DWA) are jumping after several media outlets reported that the company was in talks about selling itself to toy maker Hasbro (HAS) . However, research firm Sterne Agee wrote that the deal was illogical and not very likely to occur.

WHAT'S NEW: Hasbro is in advanced talks to buy DreamWorks for a mix of cash and stock, The New York Times reported this morning. The movie maker is seeking more than $30 per share from Hasbro, the Times added. DreamWorks is trying to obtain $35 per share from Hasbro, entertainment news website Deadline reported.

ANALYST REACTION: In a note to investors today, Sterne Agee analyst Vasily Karasyov wrote that there is "no industrial logic" whatsoever to a combination of DreamWorks and Hasbro. There is no good reason why Hasbro would pay a price equal to 41% of its market cap for DreamWorks, which has admitted to facing serious challenges, the analyst believes. He thinks the most probable outcome is that the deal will not occur. The analyst kept a $17 price target and Underperform rating on DreamWorks; shares. In its own note to investors, Wells Fargo wrote that such a deal would expand Hasbro's movie making capabilities, but also increase its risk, given the mixed track record of DreamWorks' movies. The firm also noted that Mattel (MAT) partners with DreamWorks on several of its product lines. If Hasbro does buy DreamWorks, Mattel would probably not renew its deal with the movie production company, Wells stated. Meanwhile, Piper Jaffray said the possible acquisition of DreamWorks Animation by Hasbro could impact the latter company's partnership with Disney (DIS) . Piper thinks the acquisition would be accretive to Hasbro, but says that buying a competing animation company could alter Disney's view of Hasbro as a partner. It thinks these risks need to be considered, but keeps an Overweight rating on Hasbro.

PRICE ACTION: In early trading, DreamWorks jumped 16% to $25.98, while Hasbro fell 5% to $54.72 and Mattel slid 0.5% to $31.16.

Reporting by Larry Ramer.

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