Under the agreement, Mandalay will develop and produce about 20 films over the next five years which Paramount will market and distribute in the United States and some overseas territories.
Mandalay, which was behind last year's box-office hit "I Know What You Did Last Summer," has output deals with foreign distributors in Britain, Italy, Germany, France, Japan, Spain, Australia and Greece.
LG Pictures, a wholly owned subsidiary of the publicly traded Canadian company Lions Gate Entertainment Corp., will be the principal equity investor in Mandalay, with the majority interest being held by Guber, his co-founding partner Paul Schaeffer and company President Adam Platnick.
Sources say Paramount will be about a one-third partner in the movies.
A prolific producer like Mandalay, which also made "Donnie Brasco," "Seven Years in Tibet," "The Fan" and the recent box-office dud "Desperate Measures," will be a welcome addition to the Paramount family, since the studio likes to share the financial risk of movie making with partners. (Paramount is partnered with 20th Century Fox on the current $1-billion-plus worldwide mega-hit "Titanic.")
Guber, controlling partner in Mandalay, said he is thrilled to be housing his company at Paramount, since he has worked with several of the entertainment company's top executives, including Viacom Entertainment Group Chairman Jonathan Dolgen and studio Chairwoman Sherry Lansing.
"And the last time I was on the Paramount lot I made 'Flashdance,' " said Guber, who as an independent producer also helped make the films "Rain Man," "The Color Purple," "Midnight Express" and "The Witches of Eastwick."