DreamWorks Nets In Reliance

In what is an unprecedented development for Indian corporations and world film production a historic and possibly ground breaking deal between Anil Ambani’s Reliance Group and Steven Spielberg’s DreamWorks studio has now been completed. What makes this deal all the more important for India Inc. is the fact that it paves the way for similar Indian business houses to aggressively pursue film and entertainment avenues in addition to the IT, Manufacturing and conventional companies Indian businesses have always been known to be interested in.

So if you happen to encounter an Indian character in DreamWorks’ Shrek films in future, don’t be surprised!

The financials of this deal are pretty simple but involve huge amounts of money. Reliance will firstly invest 500 Million Dollars in equity shares while bankers JP Morgan Chase will invest the remaining 700-750 million dollars on a debt basis. This brings the total deal to be worth around close to 1.2 billion dollars.

DreamWorks is currently owned by the Viacom group. Problems between them and DreamWorks have been present ever since the company was taken over by them a little over two years ago under their ‘Paramount Pictures’ brand. DreamWorks were therefore constantly on the lookout for someone who could purchase the company back from Paramount thereby freeing them.

This is where Reliance came in as an unlikely and surprising entrant. Negotiations have been on between both companies for a major part of the year. The deal was more or less finished until a few months ago when the finer details such as the exchange of finance caused a delay leading to many speculating whether Reliance had backed out.

For DreamWorks, this deal was imperative to save their troubled partnership from Paramount Pictures. It also opens up a whole new world of opportunities for them in India and beyond. Since Reliance dominates many sectors such as telecom and infrastructure the films of this formidable unit will definitely not go unnoticed.

Reliance has already set up their entry into Hollywood on the back of successful deals with the likes of George Clooney as they announced earlier in the year at the Cannes Film Festival .This basically sets up enough films to be made under Spielberg’s creative experience and Reliance to take care of arranging top Hollywood stars to act in the same. The only chink lies with the distribution of these films but with Universal Pictures’ well known association with Spielberg that doesn’t seem to be too much of a problem.

Perhaps the most important aspect of this deal lies in the fact that Hollywood will now be forced to sit up and take notice of Indian corporations. For Reliance to agree to pour in Half a Billion dollars into this new outfit is a sign that well run Indian companies have more liquidity in the midst of the current financial crisis compared to others.

Some signs indicate that Spielberg might not even have to change the name of his studio from DreamWorks, but this will become clear only after the finer aspects of the deal become public.

For Reliance, another successful venture and for Spielberg & co.,a shot in the arm.