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In or near Bree there happened a chance meeting of two more or less strange travellers by the name of Thorin, a Dwarf and Gandalf the Wizard. They spoke long about the concern of the Dwarves of Durin's Folk and a very unpleasant dragon called Smaug. Thorin wanted to gain back the treasure of Erebor with his companions so Gandalf told him to bring something unexpected with them, something Smaug didn't know. Therefore he arranged a meeting between the Dwarves and a Hobbit, Bilbo Baggins, who should accompany them as a burglar. This happened before the story of 'The Hobbit' starts.
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