LOS ANGELES -- Paramount Pictures on Sunday agreed to buy independent film studio DreamWorks SKG 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.
"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.
Paramount will retain distribution rights to the 59 library titles, which includes such hits as Oscar-winners "American Beauty" and "Gladiator."
The agreement does not include DreamWorks Animation SKG, which was the most profitable part of the company. Paramount does gain the right to distribute the animated studio's lucrative films for the next seven years, including the profitable "Shrek" franchise.
Paramount put its offer together just last week, after DreamWorks had been discussing terms with NBC Universal, a unit of General Electric Co.
NBC Universal made an offer in September, then reduced it at the last minute. That angered Geffen. "We tried very, very hard to conclude a deal with General Electric, which we were never able to do," Geffen said.
The deal makes sense in the short term for Paramount, which has needed an immediate boost in production and prestige, media investor Harold Vogel said.
"Basically, GE was book-smart and Paramount was street-smart," Vogel said. "They're aggressive, they're hungry and they figured they could pay the price," Vogel added of Paramount. "GE was counting the beans."
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