Paramount agrees to buy DreamWorks

Paramount Pictures has said it had reached an agreement to acquire DreamWorks SKG, the studio founded 11 years ago by Steven Spielberg, Davi...

Paramount Pictures has said it had reached an agreement to acquire DreamWorks SKG, the studio founded 11 years ago by Steven Spielberg, David Geffen and Jeffrey Katzenberg. But in revealing the terms of the $1.6 billion deal, Paramount included one unforeseen twist. To offset as much as $1 billion of the hit to its balance sheet, the studio plans to sell DreamWorks’ 59-film live-action library, which includes the Academy Award-winning films ‘‘American Beauty’’ and ‘‘Gladiator.’’

The studio said it was in advanced talks with outside investors. But instead of having a stake in the studio itself, those investors would buy control of the library outright. ‘‘I can’t stress how transforming an event this is,’’ Paramount chief Brad Grey said.

If the deal goes through, then Paramount will pay $775 million in cash and initially assume $840 million in DreamWorks debt. Then, a private equity group, not yet selected, is expected to acquire the library for $850 million to $1 billion, including the assumption of $550 million in DreamWorks debt taken on by Paramount.

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That would reduce Paramount’s contribution to $300 million to $400 million in cash, plus the assumption of $275 million in debts owed to such third parties as Technicolor, HBO and NBC Universal. The sale to Paramount would terminate DreamWorks’ distribution contracts with NBC Universal, which currently releases its movies in international markets and its DVDs worldwide.

The studio, owned by General Electric Corp, spent more than six months negotiating to buy DreamWorks.

—LAT-WP

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