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DreamWorks-Reliance: Perseverance pays off

The players involved wouldn't let the deal fall apart

Few deals in recent years have played out against as dramatic a backdrop or contained as many twists as the pact between Steven Spielberg and Stacey Snider’s DreamWorks and Indian media conglom Reliance.

A collapse of global financial markets, the unexpectedly acrimonious end to Spielberg’s decades-long relationship with Universal Pictures and the terrorist attacks in Mumbai in November 2008 were only some of the factors dealmakers had to contend with from the time the accord was reported on in June 2008 to its final closing in August this year.

During that time, the scope of the deal changed significantly. Initially, India media maven Anil Ambani’s Reliance ADA Group had promised to invest up to $550 million in equity for DreamWorks 3.0 on the understanding that an equal amount of debt would be raised by DreamWorks principals through its bankers at JPMorgan.

By the time the deal closed, Reliance had committed $325 million, with JPMorgan securing an additional $325 million in syndicated bank debt.

That the deal closed at all was something of a miracle, considering the treacherous financial landscape. It was also a testament to the efforts of numerous players behind the scenes.

“I’ve been in the business for 35 years, and I’ve never seen an environment like the one we had to deal with,” says JPMorgan managing director Alan J. Levine, who repped Reliance’s interests throughout the negotiations. “We went right into the eye of the storm. I’ve never seen an equity player like Reliance so committed and willing to stay at the table.”

“Manny Nunez got the ball rolling,” says Sky Moore of Stroock & Stroock & Lavan, who was the sole attorney repping Reliance throughout the negotiations. “This deal really represented a paradigm shift with Indian money coming into Hollywood.”

“Everything that could have possibly gone wrong did,” says JPMorgan Entertainment Industries Group managing director David Shaheen, who led the eventual $325 million debt syndication. “You had Bear Stearns and Lehman Brothers go under. It was a mind-boggling economic collapse. We still had to sell the deals to banks, but whereas we traditionally used to have 30-40 banks to talk to, that potential economic universe dropped to about 10-12 banks.”

As DreamWorks’ difficulty in raising its necessary debit obligations continued, so did speculation in Hollywood that the deal was unraveling. Matters weren’t helped when DreamWorks’ seven-year distribution deal with Universal — announced but not inked in October 2008 — came dramatically unstuck with the news that DreamWorks principals has been secretly negotiating with Disney. Their motive: DreamWorks was not able to reach a deal with Universal.

Despite the upheaval, Reliance Big Entertainment topper Amit Khanna continued to voice the company’s full backing for both Spielberg and Snider. The Disney deal came shortly after it was revealed that Spielberg had dug into his pocket — along with Reliance execs — to write Paramount a check for $26.5 million so that DreamWorks could keep 17 projects in its fold.

With credit markets still shaky, Spielberg and Reliance agreed to split the solo company’s $50 million overhead until a final deal could be reached. That interim arrangement and personal investment from Spielberg, revealed last January, have been described as a pivotal moment in the negotiations.

“The fact that the principals could talk to each otherpersonally was a great bonus,” says Spielberg’s longtime attorney, Harold Brown, a partner at Gang, Tyre, Ramer & Brown. “Part of the art of the deal for me,” Brown says, “is to make sure the pieces and the personalities fit together as well as possible. The relationships you help build go on long after the paper is signed. Steven felt a sense of responsibility to the Reliance principals and vice versa.”

“This was clearly a difficult deal to do,” DreamWorks prexy-chief operating officer Jeff Small says. “But we never had the luxury to think this wouldn’t happen. This had to happen.”

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