Paramount Buys Itself a Christmas Present: DreamWorks Pictures
The announcement was made today by Brad Grey, Chairman and CEO of Paramount Pictures.
Paramount also indicated that it is in advanced discussions with identified investors to sell DreamWorks' film library, promptly after closing. Paramount would continue to have distribution rights to the film library.
Grey said, "With the incredible talents of Steven Spielberg, Hollywood's most gifted and respected director and producer, and David Geffen, the most creative mind in show business, Paramount will be able to significantly enhance its pipeline of groundbreaking motion pictures -- a key strategic objective in restoring Paramount's stature as a leader in filmed entertainment. Further, our new distribution partnership with Jeffrey Katzenberg and DreamWorks Animation will be an important driver in building our business internationally. All together, the worldwide marketing firepower and creativity of the new Viacom brands like Nickelodeon and MTV make Paramount an ideal home for DreamWorks and a fantastic partner for DreamWorks Animation."
Under the terms of the agreement, Paramount will acquire the entire DreamWorks live-action library, which includes 59 films including such titles as "Gladiator," "American Beauty," both of which were winners of the Academy Award for Best Picture, as well as such acclaimed Steven Spielberg-directed blockbusters as "War of the Worlds," "Catch Me If You Can," "Saving Private Ryan" and "Minority Report," along with the upcoming Spielberg-directed drama "Munich," produced in association with Universal Pictures. All DreamWorks' development projects will also be acquired by Paramount as part of the agreement, including "Dreamgirls," starring Eddie Murphy, Beyonce and Jamie Foxx.
Paramount will also acquire the DreamWorks' television division and its properties, including the long-running series (now in syndication) "Spin City," as well as current shows, including the NBC hit "Las Vegas."
"We couldn't be more excited about having Steven Spielberg and David Geffen and the amazing roster of talent at DreamWorks join the Paramount family, and we look forward to our new partnership with Jeffrey Katzenberg and DreamWorks Animation," said Tom Freston, co-President and co-Chief Operating Officer of Viacom. "This is a major milestone in our efforts to re-establish Paramount as an industry leader and fuels the momentum for their emergence as a real global film company. The world-class production, development and sales teams we are gaining will certainly fuel the turnaround that Brad and his team are leading. Overnight, this makes Paramount a key contributor to new Viacom's revenue and earnings growth story."
Sumner Redstone, Chairman of the Board and CEO of Viacom, said, "The acquisition of DreamWorks is an enormous step forward in our ongoing work to unlock the full potential of Viacom's brands and businesses. The founders of DreamWorks represent some of the most creative and respected executives in this industry, and the talent and vision they will bring to Paramount cannot be overstated. We can look forward to an exciting and successful future with such a powerful team under one roof."
David Geffen said, "I have known Tom Freston for more than 25 years and Brad Grey for almost as long and have tremendous respect for both of them. I am excited and energized to be in business with them and look forward to a successful new partnership. This is a great deal for both companies and for our shareholders, investors and employees."
Steven Spielberg said, "I am thrilled by today's announcement of the deal with Viacom/Paramount, who came recently to the table and were able to conclude and sign agreements quickly. Due to my very long history and my loyalty to Universal, I was saddened that after long negotiations and many compromises, we were unable to come to terms with Universal's parent company, GE. Nevertheless, I am truly looking forward to working with Tom Freston, Brad Grey and Gail Berman, as this is an exciting opportunity for each of us to embark on a new adventure together."
Jeffrey Katzenberg, CEO of DreamWorks Animation, said, "I am excited about the benefits and new opportunities that the Paramount partnership brings to our company. Brad and his team are a first-class organization and the chance to work with Paramount and promote our movies on Viacom's network provides us a unique platform to showcase our products and build our brand. DreamWorks Animation is a company that strives to reach the broadest audience with its films and now with access to Nickelodeon and the rest of the MTV Networks brands, I believe we have a great partner for helping us achieve that goal."
Upon completion of the acquisition, the DreamWorks library is expected to be sold to a third party investor, leaving Paramount with a greatly enhanced distribution pipeline and an ongoing production partnership with Steven Spielberg and David Geffen.
Mike Dolan, Chief Financial Officer of Viacom, said, "The sale of the library allows us to reduce our investment in the transaction and enables us to focus on our key objectives -- leveraging and strengthening our distribution network through the addition of more 'A' level product and creating stronger production partnerships. As always, we focused on financial metrics that drive shareholder value, including discounted cash flows and return on invested capital, and this transaction exceeded our hurdle rates. Additionally, the transaction is accretive to net income and free cash flow in 2006. Pro-forma for the sale of the library, we will have accelerated the turnaround of Paramount, while insuring adequate capital for tuck-in digital growth opportunities and share buybacks going forward."
Also, upon completion of the acquisition, Messrs. Spielberg and Geffen of DreamWorks will enter into new employment agreements in the respective roles of producer/director and Chairman. Mr. Katzenberg will remain in his role as Chief Executive Officer of DreamWorks Animation. As part of the new organization, the production and development operations will continue under the leadership of Mr. Spielberg and Mr. Geffen, who will be responsible for producing 4-6 live action films per year of Paramount's total target slate of 14-16 films, which the company expects to achieve by 2006. Sales and other infrastructure will be integrated with Paramount operations.
Additionally, Paramount will enter into an exclusive theatrical/home video/television distribution agreement to release films from DreamWorks Animation, the business unit spun off from DreamWorks as a public company in 2004, throughout the world for the next seven years. The first picture for release under the new agreement is "Over the Hedge," scheduled to open in summer 2006.
The purchase price of the acquisition will be financed by Viacom working capital and committed financing facilities. The transaction is expected to close in the first quarter of 2006, and is subject to expiration of regulatory waiting periods.
Thanks to ComingSoon.net for sharing the press release from Paramount.