Paramount Pictures has agreed to buy studio DreamWorks SKG Inc. for $775 million in cash and assume $825 million in debt and other obligations in a deal designed to help both companies reverse their troubled fortunes reports the Associated Press.
The DreamWorks acquisition is seen as critical for Paramount, which has been under orders from parent company Viacom Inc. to improve the quality of both its movies and earnings.
The studio will finance the deal by immediately selling the DreamWorks 59 film library, which Paramount values at between $850 million and $1 billion. Titles include such hits as "American Beauty" and "Gladiator".
The agreement does not include DreamWorks Animation SKG Inc., the most profitable part of the company, but Paramount does gain the right to distribute the animated studio's lucrative films for the next seven years, including the profitable "Shrek" franchise.
The deal is expected to close early next year, increasing Paramount's overall annual production to between 14 and 16 titles annually (nearly double the amount of product its releasing this year).
