Paramount to buy Dream Works

LOS ANGELES – Paramount Pictures on Sunday agreed to buy independent film studio DreamWorks SKG Inc. for nearly $1 billion cash in a deal designed to help both companies reverse their troubled fortunes.

The sale marks the end of an 11-year dream for Hollywood moguls Steven Spielberg, Jeffrey Katzenberg and David Geffen, who had ambitious goals for DreamWorks that once included television, music, films and the Internet.

Moreover, the DreamWorks acquisition is seen as a critical gambit for Paramount, which has been under orders from parent company Viacom Inc. to improve the quality of both its movies and earnings.

Paramount will pay $775 million in cash and assume $825 million in debt and other obligations, the company said.

“We see this at Paramount as a transforming event for the studio,” said Brad Grey, Paramount’s chairman and CEO.

The studio will finance the deal by immediately selling the DreamWorks film library, which Paramount values at between $850 million and $1 billion. The company said it is in advanced talks with several parties and expects to have a deal within weeks.

Paramount will retain distribution rights to the 59 library titles, which include such hits as Oscar-winners “American Beauty” and “Gladiator.” The company is not likely to sell the library to a rival studio but to an investment group that would pay Paramount fees to distribute future products derived from the films.

The agreement does not include DreamWorks Animation SKG Inc., which was the most profitable part of the company. Upon completion of the deal, expected to close early next year, Paramount would sign new employment agreements with Spielberg as a producer and director, and Geffen, who will become chairman of DreamWorks.