DreamWorks and Reliance deal announcement soon: sources

LOS ANGELES (Reuters) - Steven Spielberg and David Geffen may announce as soon as this week a deal with Reliance ADA Group to set up a new studio and split from Paramount Pictures, sources familiar with the deal said on Sunday.

However, the DreamWorks team has not ruled out Paramount as their distributor, the sources said.

The impending union between Mumbai-based Reliance and Spielberg's DreamWorks team caps two years of speculation and feuding between Spielberg, his DreamWorks co-founder David Geffen and the brass of Viacom Inc's Paramount since the sale of DreamWorks to Viacom for $1.6 billion in 2006.

Under the deal, first reported in June but now on the verge of completion, Mumbai-based Reliance would invest about $500 million in equity. J.P. Morgan Chase & Co has offered to provide debt to DreamWorks, which had sought an additional $500 million in financing, said a source close to the deal.

Once the Reliance deal, first reported in June, is formally announced, the DreamWorks principals will turn their attention to finding a partner to distribute their six films a year, said the source close to the deal.

While it is well known that Spielberg has deep ties to General Electric Co's Universal Pictures, Universal President Ron Meyer told Reuters last month he had not yet been approached by DreamWorks, but welcomed the opportunity.

And another source this week said while a decision regarding distribution may take months, DreamWorks was remaining open to having Paramount distribute its films.

"Paramount is still very much in the running," said one source with knowledge of the discussions.

Even if Team Spielberg picks another distributor for its venture, as many as 12 completed projects, including the upcoming sequel to the megahit "Transformers," will be distributed by Paramount over the next several months due to their existing relationship.

It is unclear how Spielberg and Paramount will divide up remaining projects now under development. Paramount reportedly has a development pool of more than 100 projects, including about 30 attached to Spielberg.

DreamWorks spokesman Chip Sullivan declined to comment, while officials for Paramount had no immediate comment and Reliance was not immediately available.

One source familiar with the deal said Geffen would likely announce his departure from Paramount effective at the end of this month when the Reliance deal is announced.

The Wall Street Journal on Saturday reported that Spielberg and his close collaborator, DreamWorks Chief Executive Stacey Snider, can leave Paramount 60 days after Geffen's move.

Reliance has been working to build up a name in Hollywood. In May, the company controlled by billionaire Anil Ambani signed deals with eight Hollywood production houses run by A-list actors, including George Clooney's Smokehouse Productions, Tom Hanks' Playtone Productions and Brad Pitt's Plan B Entertainment.

(Reporting by Sue Zeidler, editing by Richard Chang)