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Bronfman on PolyGram
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May 28, 1998: 11:02 a.m. ET
Seagram CEO not worried by critics, sees entertainment as company's future
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NEW YORK (CNNfn) - Responding to criticism that Seagram Company Ltd. may be overextending itself by offering $10.4 billion for PolyGram, CEO Edgar Bronfman Jr. said Wednesday the company's future was in entertainment and that businesses like Tropicana were not living up to their true potential under the Seagram umbrella.
A partial transcript of his comments on CNNfn's "Moneyline with Lou Dobbs" follows:
LOU DOBBS, CNNfn ANCHOR: Congratulations on the modest $10.4 billion bid. Why did you decide at this point to go that big after Polygram?
EDGAR BRONFMAN JR.: We had a vision for Universal when we first bought it that we were going to focus on the music business and the recreation business.
And to that end, we've got about a $4 billion expansion in our theme park business, a new fantastic park opening in Florida next summer and a theme park opening in Japan two years after that. We've built our music business up and doubled our domestic market share. But building an international music business is a tough thing to do and we always knew if we could buy an international business well, we wanted to do that.
DOBBS: This will be truly a complementary acquisition in terms of domestic, versus international businesses. How much cost savings can you really, in your judgment achieve through the combination of the businesses?
BRONFMAN: We've told the market we think we can achieve anywhere from $275 to $300 million worth of cost savings just by combining the two music businesses.
DOBBS: And to in part to pay for that acquisition, the sale of Tropicana?
BRONFMAN: Yes.
DOBBS: Now that business has been good to you. Why do you want to sell it? Purely to retire the expense of the acquisition?
BRONFMAN: Well, I can't unfortunately say too much about Tropicana, because we're in registration. There are certain SEC rules. But what we've said is that we didn't feel that Tropicana, which is a great company, was getting full value reflected in Seagram's stock.
We were an entertainment business and a spirits and wine business and Tropicana was really getting lost. So our view was that we were going to unlock that value one way or the other, whether it was in the context of a Polygram acquisition or in some other way so that our shareholders would get the value of that business.
DOBBS: Now you've been criticized over the years for the DuPont divestiture to make your other acquisitions. Now another divestiture, the (Tropicana) spin-off. How does that factor into your thinking at this point? You have had about three years to learn to live with some criticism.
BRONFMAN: I have learned to live with the criticism, but you know, if you look at Seagram today we've got a great future. We've got, we are an entertainment leader, the largest music business in the world. …Our spirits and wine business is growing, but 90 percent of our value would be reflected in the stock of another public company. And I'd be under pressure to spin it off to shareholders somehow liquefy that asset, which by the way would be wildly illiquid and subject to tremendous tax. So it's been a difficult transition and our shareholders, many of them have been extremely patient and supportive. But I think our future is clear and very exciting.
DOBBS: Who will run Polygram, your combined music business?
BRONFMAN: Well, we're sitting down and we're talking that issue through right now. What we want to do is get the best of both businesses. We think we can combine these business in a uniquely exciting way. We've got great music management around the world. They have great music management around the world and we're going to take our time to make sure that we marry those two managements in the best way possible.
DOBBS: Marry those managements. Can those managements be married? Is there a role for both (Alain) Levy and (Doug) Morris?
BRONFMAN: I think time will tell. I mean I think these business are very subject to people and the way people want to work together, and I think we need some time to have Doug and Ellen and myself and Frank Biondi and others who are involved with this acquisition talk about how this business might be managed and whether or not there's a role for everyone who might be involved.
DOBBS: Wall Street applauding this acquisition. Starting now to talk about the way in which you're aligning the company. Personally, how are you feeling about the reception for the moves you've made most recently?
BRONFMAN: It's always better when people like what you do than when they don't like what you do. But if you have a vision and you know what you're going to do, I think you've just got to follow through on that. Winston Churchill had a great line, which I always remember on the days when I read the bad press, which says it's very difficult to look up to leaders who keep their ears to the ground. 
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