Paramount Pictures has signed a definitive agreement to acquire DreamWorks SKG for $1.6 billion in cash and assumption of debt. The deal brings Paramount key assets, including:

* All of DreamWorks' current projects in development
* An ongoing production partnership with Steven Spielberg and David Geffen
* An exclusive, worldwide distribution agreement with DreamWorks Animation beginning in 2006
* DreamWorks' live-action library
* DreamWorks' television division and its properties
* Exclusive rights to future DreamWorks Animation characters in TV shows

Paramount also indicated that it is in advanced discussions with identified investors to sell DreamWorks' film library, promptly after closing. Paramount would continue to have distribution rights to the film library.

Brad Grey, chairman/ceo of Paramount Pictures, said, "With the incredible talents of Steven Spielberg, Hollywood's most gifted and respected director and producer, and David Geffen, the most creative mind in show business, Paramount will be able to significantly enhance its pipeline of groundbreaking motion pictures — a key strategic objective in restoring Paramount's stature as a leader in filmed entertainment. Further, our new distribution partnership with Jeffrey Katzenberg and DreamWorks Animation will be an important driver in building our business internationally. All together, the worldwide marketing firepower and creativity of the new Viacom brands like Nickelodeon and MTV make Paramount an ideal home for DreamWorks and a fantastic partner for DreamWorks Animation."

Under the terms of the agreement, Paramount will acquire the entire DreamWorks live-action library, which includes 59 films including such titles as GLADIATOR, AMERICAN BEAUTY, both of which were winners of the Academy Award for Best Picture, as well as such acclaimed Steven Spielberg-directed blockbusters as WAR OF THE WORLDS, CATCH ME IF YOU CAN, SAVING PRIVATE RYAN and MINORITY REPORT, along with the upcoming Spielberg-directed drama MUNICH, produced in association with Universal Pictures. All DreamWorks' development projects will also be acquired by Paramount as part of the agreement, including DREAMGIRLS, starring Eddie Murphy, Beyonce and Jamie Foxx.

Paramount will also acquire the DreamWorks' television division and its properties, including the long-running series SPIN CITY, as well as current shows, including the NBC hit LAS VEGAS.

"We couldn't be more excited about having Steven Spielberg and David Geffen and the amazing roster of talent at DreamWorks join the Paramount family, and we look forward to our new partnership with Jeffrey Katzenberg and DreamWorks Animation," said Tom Freston, co-president/co-coo of Viacom. "This is a major milestone in our efforts to re-establish Paramount as an industry leader and fuels the momentum for their emergence as a real global film company. The world-class production, development and sales teams we are gaining will certainly fuel the turnaround that Brad and his team are leading. Overnight, this makes Paramount a key contributor to new Viacom's revenue and earnings growth story."

Sumner Redstone, chairman/ceo of Viacom, said, "The acquisition of DreamWorks is an enormous step forward in our ongoing work to unlock the full potential of Viacom's brands and businesses. The founders of DreamWorks represent some of the most creative and respected executives in this industry, and the talent and vision they will bring to Paramount cannot be overstated. We can look forward to an exciting and successful future with such a powerful team under one roof."

Geffen said, "I have known Tom Freston for more than 25 years and Brad Grey for almost as long and have tremendous respect for both of them. I am excited and energized to be in business with them and look forward to a successful new partnership. This is a great deal for both companies and for our shareholders, investors and employees."