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Jeffrey Katzenberg Fantasizes About Merging DreamWorks Animation With Paramount

DreamWorks Animation CEO Jeffrey Katzenberg told investors he isn’t interested in buying a minority stake in Paramount Pictures, but he sounded pretty attracted to the prospect of one day merging the two studios.

“I could imagine that with a good financial partner coming with us, putting the assets of Paramount and DreamWorks together could be extremely valuable and we could bring a lot to that business,” said Katzenberg.

At this juncture, Viacom, Paramount’s parent company, has only said it will bring in an equity partner, but that didn’t stop Katzenberg from hinting to the crowd at the Morgan Stanley Technology, Media & Telecom Conference on Tuesday, that he’s game to buy the company outright if someone else wants to join him.

He noted that he hadn’t looked under the hood of the company or spent a great deal of time thinking about such a union, but hinted that he saw attractive synergies.

“Do I fantasize about it though? Yeah,” Katzenberg said. “I wouldn’t do it if I didn’t have a financial partner to come along and put a big piece of capital into that. I would want to do it in a way that was a good thing for the company and for shareholders, not just because it would be a good thing to have.”

As for buying a non-controlling position in Paramount, Katzenberg was blunt.

“That would have no interest for us,” he said.

Katzenberg began his career at Paramount, rising up the ranks to eventually become president of production. At DreamWorks Animation, he used Paramount to distribute the studio’s movies, although that pact ended sourly in 2013. Fox now serves as DreamWorks Animation’s distribution partner.

Beyond musing about marrying his children’s entertainment company with the studio behind “Star Trek” and “Mission: Impossible,” Katzenberg sounded a stay the course note. It’s been a punishing period for DreamWorks Animation. Following a series of film flops such as “Penguins of Madagascar” and “Turbo,” the company went through a management shakeup and layoffs, reducing its staff by 500 people and trimming the number of films it releases annually from three to two.

There have been signs that DreamWorks Animation is beginning to regain its footing. “Kung Fu Panda 3” has earned $313 million globally to date since opening in January and the studio scored a hit last year with the alien comedy “Home,” which earned $386 million worldwide. The company has also shuffled its creative leadership, bringing in “How to Train Your Dragon” producers Bonnie Arnold and Mireille Soria as co-presidents of feature animation.

“We’re probably about halfway through achieving the goals that we set out for ourselves,” said Katzenberg. “It was a pretty dramatic and serious really reset of the business.”

As its film business has shrunk, DreamWorks Animation has dramatically increased its television operations. In roughly three years, and by signing deals with the likes of Netflix, that unit has become the company’s major source of cash flow.

“It is our most profitable asset,” said Katzenberg.

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