DreamWorks Animation SKG Inc., creator of the “Shrek” films, said the company and its investors will sell as much as $725 million of shares in an initial public offering to fund movie production and repay debt.

DreamWorks Animation, based in Glendale, Calif., will sell 29 million shares at between $23 and $25 a share, the company said in a Securities and Exchange Commission filing.

DreamWorks’ chief executive, Jeffrey Katzenberg, 53, is taking the animation unit public in a year of box office success: “Shrek 2” has brought in $876.6 million in worldwide sales and the company’s “Shark Tale” has generated $87.3 million as of October 10. The company has made money in two of the last five years, according to a regulatory filing.

“They key is that they have to produce content that I want to see,” said a Boston-based fund manager at North American Management Co., David Baker. “Historically, these types of companies have not been run well. I don’t know if that’s going to be the case at DreamWorks, but that certainly is the issue at hand.”

Baker oversees $550 million in assets, including shares of Comcast Corp. He said he’s considering an investment in DreamWorks Animation.

DreamWorks Animation is selling 27.5% of its total stock in the IPO, the company said in its SEC filing. The company has a total of 105.6 million shares and its market value at $25 a share would be $2.64 billion, about half that of Pixar.

DreamWorks Animation plans to use $175.5 million of the proceeds for the IPO for “general corporate purposes” and the remaining money to repay $355 million of a $405 million loan, the company said in the SEC filing.

In the three months to September 30, DreamWorks Animation had operating income of between $25 million and $30 million on revenue of between $230 million and $240 million, the company said in the filing.

DreamWorks Animation in the filing said the sale of all registered shares may raise as much as $844 million.

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are managing the IPO together with Banc of America Securities LLC, Bear Stearns Cos., Merrill Lynch & Co., HSBC Holdings Plc, SG Cowen & Co., Allen & Co. LLC, ING Groep NV, Ramirez & Co., Siebert Capital Markets, and Utendahl Capital.

A Goldman Sachs spokeswoman, Andrea Rachman, and a JPMorgan spokesman, Joseph Evangelisti, declined to comment. Andrew Spahn, a Dreamworks Animation spokesman, declined to comment.

The shares will trade on the New York Stock Exchange under the symbol “DWA,” the company said. Dream-Works Animation in July filed to raise $650 million in its initial share sale.

“I think it’s going to trade at a premium,” said Richard Steinberg, president of Steinberg Global Asset Management, in Boca Raton, Fla., which owns shares of media companies including Time Warner Inc. and Viacom Inc. among its $375 million under management. “You have got the brand recognition of the principals, so I would expect this to be a hot deal.”

Mr. Steinberg said he’s considering purchasing DreamWorks Animation shares.

The animation unit currently is part of closely held DreamWorks SKG, founded in 1994 by film director Steven Spielberg, former Walt Disney Co. studio chief Mr. Katzenberg and music executive David Geffen.

The sale allows DreamWorks to capitalize on its strongest unit after box-office failures with its live-action movies and the sale of its music unit.

Mr. Katzenberg, who left Walt Disney Co. after being passed over to become president, will get the chance to run a public company for the first time. He’ll be competing with Disney, which lost its film distribution agreement with Pixar Animation Studios and stumbled with animated films such as “Treasure Planet.”

Messrs. Katzenberg and Geffen will control more than 90% of DreamWorks Animation voting shares and will “have the collective ability to control all matters requiring stockholder approval,” the SEC filing said.

Messrs. Katzenberg and Geffen will each receive about $163.9 million in Class B stock as part of the separation of DreamWorks Animation from DreamWorks SKG.

Billionaire and Microsoft Corp. founder Paul Allen will receive Class A stock worth $884.9 million and Spielberg will receive Class A shares worth $163.9 million.

“Entertainment is a fickle business and would be investors in DreamWorks are in many ways betting on the principals,” said the president of Liebau Asset Management in San Marino, Calif., Jack Liebau. “Given their creative success that might not be a bad bet.”

Mr. Liebau owns shares of entertainment companies such as Sony Corp., News Corp. and Walt Disney Co. He is based in San Marino, Calif., and said he’s considering an investment in DreamWorks.