DreamWorks' Katzenberg Muses About a Paramount Merger

  • Animation CEO worked at legendary studio for 11 years
  • Planned sale of Paramount stake doesn't interest DreamWorks

DreamWorks Animation SKG Inc. would be interested in combining with Viacom Inc.’s Paramount Pictures if it could find a financial partner to back a deal, Chief Executive Officer Jeffrey Katzenberg said.

The independent animation studio would only be interested in a full merger and not just a stake in Paramount, Katzenberg said Tuesday at a Morgan Stanley investor conference in San Francisco. 

“I’m not spending a lot of time tactically thinking about it,” Katzenberg said. “When asked if I look at something, do I fantasize about it though? Yeah.”

A Viacom spokesman declined to comment. Chairman and CEO Philippe Dauman said last week that he was considering selling a minority stake in Paramount to raise cash and potentially gain strategic expertise overseas or with a technology partner. Dauman said Viacom had already spoken to a number of potential investors.

Katzenberg said his company doesn’t need a merger partner, as film and TV investments made in recent years are beginning to bear fruit. He worked at Paramount -- maker of classics like “The Godfather” and “Raiders of the Lost Ark” -- for 11 years, and the studio distributed DreamWorks Animation films for seven.

“I don’t subscribe to bigger is better,” he said. “We are better positioned because we’re not bigger.”

DreamWorks, founded in 1994, has had huge hits such as “Shrek” and the “Kung Fu Panda” franchises, but also some duds, like “Mr. Peabody and Sherman,” amid increasing competition in the animated film industry. In his presentation Tuesday, Katzenberg sketched out a turnaround that involves making a smaller number of higher-quality films, while producing more TV shows, consumer products and content for online channels such as its AwesomenessTV unit.

The Glendale, California-based company has $111 million in cash, about $360 million in debt and a stock market value of $2.2 billion, making a solo acquisition of Paramount a stretch. Paramount has been valued by analysts at around $4 billion.

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