The friendly price Comcast (CMCSA - Get Report) agreed to acquire DreamWorks Animation (DWA) has heightened speculation that Viacom (VIAB - Get Report) may be poised for a bigger-than-expected payday for the sale of a minority stake in its film studio, Paramount Pictures.
The DreamWorks deal, announced Thursday, has also increased speculation that Lions Gate Entertainment (LGF) may finally be getting close to a merger with Starz (STRZA) , which was surging Friday following a report from RBC Capital Markets that the two companies with ties to media mogul John Malone may be near to combining.
Shares of Starz, a premium cable-TV network, were gaining 8.5% to $26.92.
As for valuing potential deal, Comcast has agreed to pay $41 a share for DreamWorks, a premium of 51% from where the stock was trading before merger talks became public on Tuesday.
The happiest player in the post-DreamWorks merger sweepstakes may be Viacom CEO Philippe Dauman, who has been embroiled as much in the drama over the health and welfare of the company's controlling shareholder Sumner Redstone as the continuing struggle of his his company to reverse declining advertising sales as its cable-TV network, MTV and Nickelodeon.
Speaking on an investor conference call Thursday soon after Comcast announced the DreamWorks acquisition, Dauman sounded optimistic that he will get a similarly rich valuation for a minority stake in Paramount, a much larger studio and most recently, the maker of The Big Short.
"Well, I think it shows the value," Dauman said. "There is strong interest from around the world and we think at this stage based on the conversations that I have had, that we will have a compelling result."
Paramount's value could run as high as $4 billion, said FBR media analyst Barton Crockett, adding that Paramount's library is roughly six times as large as that of DreamWorks. Proceeds of the sale would be used to pay down debt and buyback shares to satisfy investors who may have grown impatient with Viacom's planned turnaround.
"The DreamWorks sale is very big for Paramount because they're in the late stages of negotiations," Drexel Hamilton media analyst Tony Wible said in a phone interview. "Whoever ends up taking a stake in Paramount may end up paying more than they would have a week ago."
Yet while Paramount does own more and arguably better franchises than DreamWorks, the studio has been performing relatively poorly compared to the rest of the major studios in recent years, Wible added. Viacom shares have fallen 43% over the past year as the company has struggled to create hits for both its film and cable-TV businesses.
As for Lions Gate, it remains unclear whether the largest Hollywood studio not owned by a media conglomerate, is a buyer or seller. Lions Gate shares though have jumped 8% since merger talks between DreamWorks and Comcast's NBCUniversal became public on Tuesday.
LionsGate, wrote RBC analyst Steven Cahall in an investor note, "remains interested in a strategic combination" with Starz which offers the studio global distribution for its movie content and extensive library. Malone, the billionaire media investor, owns stakes in both companies to go along with his controlling position in Liberty Global (LBTYA) , which owns extensive cable-TV networks in Europe and Latin America.
With Lions Gate jumping in the wake of the DreamWorks deal announcement, any merger is likely to include a stock component to a prospective deal, Cahall said.
Lions Gate could also capture a higher valuation than DreamWorks, said Barton Crockett, media analyst at FBR & Co. in an investor note on Friday.
Whereas DreamWorks' 2016 earnings before interest, taxes and other deductions is expected to reach $92 million, Lions Gate can expect normalized earnings with the same exceptions in the range of $350 million to $400 million, he said. As a result, LionsGate's enterprise value -- its market capitalization plus the value of its debt and cash -- exceeds DreamWorks.
"In an acquisition by a conglomerate, there could be synergy opportunities at Lions Gate that in broad strokes are comparable to DreamWorks," Crockett said. "So the enterprise value in an acquisition on Lions Gate should easily be no less than DreamWorks in a merger, and arguably a premium to DreamWorks."
Like DreamWorks, Lions Gate has been building its non-movie divisions such as televisin production and gaming to better withstand down cycles in in film business. The Hunger Games: Mockingjay Part 2, the fourth and final Hunger Games movie earned $650 million worldwide, less than earlier installments of the series.