• BusinessWeek, Monday, March 13, 2006 11:30 AM

The New York Times' Andrew Ross Sorkin takes a moment to sit back and analyze the recently announced deal between the Paramount unit of Viacom and DreamWorks, and he concludes that, basically, Paramount appears to have been suckered. It grossly overpaid for the glitzy content company headed by Hollywood moguls Steven Spielberg, Jeffrey Katzenberg, and David Geffen. Sorkin does the numbers, and while he doesn't say that Viacom cannot make this work, he strongly suggests it's going to take some luck--big box-office hits, in particular--for the deal to look good on Viacom's books. He says too that Paramount, under the fresh leadership of Brad Grey, may have been especially eager to make a splashy move, which is why it outbid GE for DreamWorks. "It is too bad that so many investors and analysts became star-struck, because they appear to have overlooked doing any real analysis of the transaction," writes Sorkin. "If they had, they might have come to this conclusion: Mr. Geffen, a master negotiator, twisted Viacom into overpaying so much for the deal--outbidding General Electric's Universal--that the producers of the bloated box-office flop 'Waterworld' may start to look smart. This may all become apparent in the next couple of weeks, or possibly sooner, as Paramount nears a deal to offload DreamWorks' movie library to a group of private equity investors led by George Soros, according to people involved in the talks." A Paramount executive recently defended the deal, saying it would prove to be a winner for Viacom and Paramount, although Sorkin's analysis indicates otherwise.

Read the whole story at BusinessWeek »