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DreamWorks completes deal with Reliance ADAG

Posted by Yogesh on Saturday, 20 September, 2008

LOS ANGELES: The principals of DreamWorks SKG have signed a long-expected deal with Reliance ADA Group of India to establish a new $1.2 billion film company, allowing the studio co-founded by director Steven Spielberg to leave Paramount Pictures.

The deal between DreamWorks and the Mumbai-based entertainment, financial and telecommunications conglomerate caps two years of speculation and feuding between Spielberg and his DreamWorks co-founder David Geffen with the brass of Viacom Inc’s Paramount. DreamWorks had no immediate comment on formation of the new film company, which two sources close to the deal valued at $1.2 billion.

The transaction was confirmed on Friday in a statement by Paramount, saying it had waived “certain provisions” from its original deal with DreamWorks “to clear the way for the DreamWorks principals and their employees to join their new company without delay.”

Under the deal, as reported by The Wall Street Journal , Reliance will invest about $500 million in equity, while J.P. Morgan Chase & Co will provide $700 million in debt toward the new venture.

The basics of the deal were first reported in June, but the fine points of the agreement have been under negotiation until this week, sources said.

With the deal completed, it is expected the DreamWorks principals will turn their attention to finding a partner to distribute roughly six DreamWorks films a year. Spielberg has long ties to General Electric Co’s Universal Pictures, which is widely regarded as a leading choice to release DreamWorks future pictures. But no deal with Universal is known to have been reached.

Reliance is an Indian conglomerate with operations in telecommunications, financial services and energy, though it has more recently branched out into show business. The deal between DreamWorks and Reliance comes as financing in Hollywood has become increasingly tight due to the credit crisis on Wall Street.

In turning to Reliance, DreamWorks wins access to a stable source of financing, while Reliance stands poised to use the partnership to expand its reach into the U.S. movie market.

Reliance, which is controlled by billionaire Anil Ambani, in May signed deals with eight Hollywood production houses run by A-list actors, including George Clooney and Brad Pitt. Source The Times of India

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