DreamWorks Animation SKG Inc announced on Thursday it will cut its workforce by nearly a quarter as a part of a new strategic plan to restructure its core feature animation business.
The company said that under the leadership of Arnold and Mireille Soria, newly appointed as co-presidents of its animated film business, the division will only release two, down from three, movies a year, including one sequel and one original title.
Starting 2016 DWA will redirect its efforts to six movies over the next three years, including The Croods 2, Boss Baby and Larrikins.
Additionally, its Captain Underpants movie, which is due to be released in 2017, will be filmed outside the companys studio, significantly reducing production costs, DWA said.
Due to the decreased film output DWA is parting ways with around 500 employees, the company said in a statement. The creator of How to Train Your Dragon and Kung Fu Panda animated movies will incur a pre-tax charge related to the restructuring of $290 million.
“The number one priority for DreamWorks Animation’s core film business is to deliver consistent creative and financial success,” said Chief Executive Officer Jeffrey Katzenberg.
DWA will also undergo changes in its senior management. Chief Operating Officer Mark Zoradi, Chief Marketing Officer Dawn Taubin and Vice-Chairman Lewis Coleman, would be released later this year after 7 months, less than 2 and 10 years on the job, respectively.
The restructuring plan is expected to be completed by the end of 2015 and to generate around $110 million in cash payments through the year. The company also projected the move would reflect in $30 million in costs savings in 2015 and $60 million by 2017.
Mr. Katzenberg has been looking for a possible buyer for DWA, which was spun of from DreamWorks in 2004, during recent years. The company was in talks with SoftBank and Hasbro over a possible deal. However, negotiations with both the Japanese tech giant and the US toymaker disbanded after a period of time.
“I am confident that this strategic plan will deliver great films, better box office results, and growing profitability across our complementary businesses,” said Mr. Katzenberg.
DreamWorks Animation SKG Inc gained 3.05% on Thursday and closed at $21.31 on the NASDAQ, marking a one-year decrease of 38.80%. The company is valued at $1.82 billion.
According to CNN Money, the 11 analysts offering 12-month price forecasts for DWA have a median target of $22.00, with a high estimate of $27.00 and a low estimate of $14.00. The median estimate represents a 3.24% increase from the last close price.
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