Spielberg, Anil (below)

Los Angeles, Aug. 10 (Reuters): Steven Spielberg and David Geffen may announce as soon as this week a deal with Reliance Anil Dhirubhai Ambani Group to set up a new studio and split from Paramount Pictures, sources have said.

Spielberg’s DreamWorks has, however, not ruled out Paramount as its distributor.

The impending union between Reliance and the 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, 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, the source said.

Once the Reliance deal, first reported in June, is formally announced, the DreamWorks principals will look for partners to distribute their six films a year.

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

Another source said DreamWorks was open to having Paramount distribute its films. “Paramount is still very much in the running.”

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 because of 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 and Paramount declined comment. Reliance was not available.