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NBC Said to Revive DreamWorks Bid

A new offer is made two weeks after talks failed, and Paramount also is interested, sources say.

October 15, 2005|Claudia Eller | Times Staff Writer

NBC Universal may buy DreamWorks SKG after all.

Two weeks after abruptly halting talks with NBC Universal, DreamWorks' owners received a counterproposal Friday from the General Electric Co.-owned studio, according to four sources close to the matter.

Terms of the offer were unknown, but one source, who declined to be identified because of the sensitivity of the negotiations, said that it was attractive enough to put the deal back on track. Earlier this month NBC Universal had balked at DreamWorks' $1-billion-plus asking price.

DreamWorks and NBC Universal executives declined to comment.

Meanwhile, another suitor has surfaced for the live-action studio, which was founded 11 years ago by David Geffen, Jeffrey Katzenberg and Steven Spielberg: Paramount Pictures

In recent weeks, Paramount, a unit of Viacom Inc., has initiated discussions with DreamWorks, according to sources familiar with both sides of the talks. Although the talks are described as serious, sources cautioned that Paramount was in the exploratory stages and was still weighing whether to make a bid for DreamWorks.

If a deal were to be struck, Paramount would need to get approval from the Viacom board.

Last month, a day before an exclusive two-month negotiating window with NBC Universal was to close, Geffen stormed away from the bargaining table after NBC Universal suddenly reduced its offer from $1 billion to about $900 million, according to sources. (Those figures don't include $500 million in DreamWorks debt that NBC Universal would have assumed under both offers.)

Geffen surmised at the time that Universal's corporate parent, GE, decided to lower its bid after DreamWorks' costly special-effects film "The Island," directed by Michael Bay, flopped and its romantic comedy "Just Like Heaven" had a disappointing debut.

Universal insiders said GE was concerned that the expected return on investment was not large enough to justify a $1-billion purchase price.

According to sources, when the deal with Universal collapsed, Paramount Pictures Chairman Brad Grey wasted no time in reaching out to Geffen.

Grey, who has been aggressively revamping the struggling movie studio since taking the helm in March, is said to be eager to add DreamWorks to the Paramount family.

A deal would give the studio access not only to more live-action films -- including such Oscar-winning blockbusters as "Gladiator" and "American Beauty" -- but also to something Paramount sorely lacks: animated fare.

If it bought DreamWorks' live-action studio, Paramount would have the right to distribute movies made by DreamWorks Animation, which was spun off in a public offering last year.

Geffen gave Grey until last Sunday to declare his intentions, sources said. The deadline came and went, but Grey has asked for more time, sources said. He argued it was tough to get quick answers from New York-based Viacom, whose board is focused on a plan to split the company in two next year, sources said.

A spokeswoman for Paramount said Friday, "It's Paramount's policy not to comment on speculation about our company's business."

But just last week, Paramount announced that it would co-finance DreamWorks' screen adaptation of "Dreamgirls" -- a pet project of Geffen's for 25 years. Although far from being the first collaboration between the two studios, which recently partnered on Spielberg's hit "War of the Worlds," the timing of the deal seemed more than coincidental.

When Geffen ended talks with Universal, he publicly expressed doubt that they could ever be revived.

But Universal Studios President Ron Meyer refused to let the issue die. Sources close to Meyer, who declined to comment, said Friday's counterproposal was the result of the studio chief's constant nudging of his boss, NBC Universal Chief Executive Bob Wright.

Although some say it was Wright who nixed the original agreement, others insist that it was his boss, GE Chairman Jeffrey Immelt.

Many Hollywood insiders had been surprised when the deal imploded, given the companies' long business history together and apparent good fit.

Spielberg, for one, is comfortable at Universal, which gave him his first break as a young director and is the place where he made such blockbusters as "Jaws," "E.T. the Extra-Terrestrial" and the "Jurassic Park" franchise. For decades, Spielberg has based his production headquarters on Universal's studio lot.

Universal and DreamWorks have partnered on a number of hit movies, including "Gladiator." Ever since DreamWorks was founded, its movies have been distributed internationally through Universal's joint venture with United International Pictures. Universal also releases DreamWorks' movies on video and DVD worldwide.

The DreamWorks team is not expected to respond to Universal until next week at the earliest. And if a deal is struck, sources said, it would not be completed until January 2006; for tax reasons, neither company wants to record the transaction on its books this year.

Times staff writer Sallie Hofmeister contributed to this report.

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