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DreamWorks Animation’s Stock Soars on Sale Talk

Softbank’s $3.4 billion play for DreamWorks Animation has sent the entertainment company’s stock soaring.

Shares of the film and television studio were up more than 20% in pre-market trading and were up 17.44% to $26.26 T 10:20.

Softbank is a Japanese telecommunications and Internet giant with investments in such companies as Sprint, Yahoo Japan and Alibaba. DreamWorks boasts a film library that includes “Kung Fu Panda,” “How to Train Your Dragon” and “Shrek,” as well as investments in the television and digital space through its acquisition of AwesomenessTV and pact with Netflix. It also has made inroads into China through its Oriental DreamWorks joint venture, which is engaged in everything from Internet content to theme parks.

Most analysts think a deal makes strategic sense.

“Unlike other consumer technology platform/distribution companies (Google, Yahoo!, Netflix), which have deliberately chosen to remain open platforms with no ties to any particular content companies, SoftBank’s past bid for Universal Music signals a desire to own content,” wrote Stifel analyst Ben Mogil in a note. “More importantly the bid for Universal Music indicates a stomach for content companies in the midst of large-scale changes in consumption patterns.”

That strong stomach could come in handy. DreamWorks Animation’s stock has undergone ups and downs as it has been battered by a series of costly film flops such as “Rise of the Guardians,” “Turbo” and “Mr. Peabody and Sherman.” Being part of a larger company might help it better withstand the cyclical nature of the film business, analysts said.

“We believe DreamWorks has attempted to find buyers in the past, and a sale would solve the existential question of what to do given a very uneven track record at the box office and a lack of meaningful profitability over the past three years,” wrote Cowen & Co. analyst Doug Creutz in a note to investors.

It’s not clear if DreamWorks Animation will continue to see its share price rise, particularly in light of a report that Softbank may be cooling on a possible purchase. That pushed the Japanese company’s stock down by more than 1%.

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