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DreamWorks Animation, Paramount Start Distribution Deal

DreamWorks Animation SKG Inc. said Wednesday it will start operating under its new seven-year distribution deal with Paramount Pictures beginning with its next animated film, “Over the Hedge,” scheduled to be released in May.

Paramount Pictures, a unit of Viacom Inc., will be responsible for the marketing and distribution of DreamWorks Animation films and will earn the same 8 percent distribution fee that had previously been paid to DreamWorks Studios, a unit of DreamWorks SKG that was acquired for $1.6 billion by Paramount.

The new agreement with Paramount expires by the end of 2012, two years longer than the original distribution deal with DreamWorks Studios. As a result of the new deal, DreamWorks Animation received $75 million in cash, which it has used toward the repayment of debt, the Glendale-based digital animation film company said in a statement.

The new agreement was contingent on the closing of Paramount’s acquisition of DreamWorks Studios, which Paramount said on Wednesday it had completed. Paramount did not buy DreamWorks Animation, the most profitable part of the company that went public last year.

Paramount Pictures, a Viacom Inc. unit, also said it is “well along in its process” to sell the DreamWorks live action film library, in a deal the company has said could be worth $850 million to $1 billion.

Soros Fund Management, run by billionaire investor George Soros, has been in exclusive talks to buy the film library, Reuters reported.

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