Paramount to buy Dreamworks for 1.6bn

Los angeles: Paramount Pictures on Sunday agreed to buy DreamWorks SKG in a $1.6 billion cash-and-debt deal that gives the Viacom Inc-owned studio a much needed boost and ends the efforts of Steven Spielberg and two other moguls to build an independent movie and television empire.

Viacom will pay $774 million in cash. The rest of the $1.6 billion purchase price is assumption of debt.

Paramount and its media conglomerate parent sealed the deal in about a week, snatching privately held DreamWorks from General Electric Co.'s NBC Universal, which had been in on-again, off-again talks for most of a year, executives said.

Viacom plans to sell DreamWorks' 59-title library, which includes Oscar winner American Beauty and hit Gladiator, for $850 million to $1 billion in the next couple of weeks, leaving it with a net purchase price of $500 million to $650 million, Viacom executives said.

Steven Spielberg, director of movies like Schindler's List and Saving Private Ryan, will stay on at DreamWorks as producer-director and studio co-founder David Geffen will remain as chairman.

The two are responsible for producing four to six live action films a year for Paramount, boosting that studio's total output to 14 to 16 pictures in 2006.

The deal "will dramatically accelerate the turnaround of Paramount," said Viacom Co-Chief Operating Officer and Co-President Tom Freston.

The transaction also sharply raises the profile of Brad Grey, the Paramount chairman and chief executive who was brought in earlier this year to shore up operations after the studio stumbled in recent years.

Freston had said Paramount had failed to pursue big budget but risky films that could bring big paydays.

The deal is expected to close in the first quarter of 2006, and will not affect the planned split of Viacom into two public companies before the end of 2005.

Freston said Viacom would still look to make smaller acquisitions in areas including interactive digital, cable systems and foreign film companies.

In addition to film production, Paramount gains the right to globally distribute movies from DreamWorks Animation SKG Inc.,which includes Shrek.