Entertainment giant Walt Disney Co. will release the third episode of its hit Toy Story films in mid-2008 following its divorce from animator Pixar

LOS ANGELES -- Entertainment giant Walt Disney Co. will release the third episode of its hit Toy Story films in mid-2008 following its divorce from animator Pixar, the industry press said Wednesday.

But even as the house of Mickey Mouse announced it would release Toy Story 3 without Pixar Animation Studios, the two firms are rekindling talks to renew their Oscar-winning production deal, Daily Variety said.

If the deal between the two powerhouses is not renewed, Toy Story 3 would be the first in the series to be produced and distributed by Disney alone after talks about renewing the 10-year deal collapsed last year.

Disney Consumer Products chair Andy Mooney announced that the company would take up its option of producing sequels to movies produced under the deal with Pixar at a meeting in New York, Variety said. The film would hit US screens in three years time, 13 years after ’95’s original Toy Story, the tale of a boy’s toys that have lives of their own.

The Toy Story movies were among the early blockbuster hits born of a 10-year collaboration between Disney and Pixar that has raked in $2.6 billion at the box office. But Pixar announced in January 2004 it was pulling out of the deal after next year’s Cars after negotiations deadlocked, reportedly over Disney’s refusal to agree to Pixar’s demands for a greater share of profits, which are split 50-50, less an 11% cut for Disney’s distribution services.

But Variety said that the two companies had "recently begun preliminary negotiations again." The storied deal has produced films including 1999’s Toy Story 2 and A Bug’s Life, Finding Nemo, The Incredibles and Monsters Inc. -- AFP