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PolyGram in demand
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May 14, 1998: 2:07 p.m. ET
Seagram confirms talks with music titan, but new bidders may enter race
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NEW YORK (CNNfn) - With a third potential buyer entering the race for PolyGram records, Seagram Co. Thursday warned investors its original buyout offer for the music company is not a lock.
Seagram, a Canadian beverage and entertainment company, confirmed that negotiations to acquire the 75 percent ownership interest in PolyGram held by Philips Electronics of the Netherlands are progressing. But the company gave no assurance an agreement would be reached.
The deal, which would propel Seagram Co. Ltd. to the top of the charts in the international record industry, was expected to close within weeks.
"It looks like it's going to take a little longer than expected because of the potential presence of more bidders," said S&P equity group analyst Thomas Graves. "If indeed there is more than one party seriously interested, then obviously the price tag could go higher. The likelihood of Seagram [closing on the deal now] is diminished."
The New York Times Thursday reported that a second investment group is considering throwing its hat into the ring to purchase the 75 percent interest in PolyGram NV owned by Royal Philips Electronics NV.
The group reportedly is comprised of Donaldson, Lufkin & Jenrette, Texas Pacific and Jerrold Perenchio, the head of Univision Communications Inc.
Already vying for Philips' majority stake in PolyGram is an investor group assembled by former talent agent and one-time Walt Disney Co. president Michael Ovitz -- and, of course, Seagram.
CNNfn reported Wednesday that Ovitz teamed with investment firms Forstmann Little & Co. of New York and Thomas H. Lee Co. of Boston to explore a possible bid for the 75 percent of PolyGram that Philips owns.
The group, represented by Allen & Co., sent a letter Monday to the supervisory board of PolyGram and Philips officials. No response has been received.
Forstmann Little & Co. and Thomas H. Lee Co., have also indicated they want to study PolyGram's financial data and meet with its management.
Seagram Co., a Canadian beverage and entertainment group, already owns MCA and Universal Studios, but the company ranks about sixth as a music entertainment company.
Despite its advanced negotiations with Seagram, Philips has concluded that it has a fiduciary responsibility to meet with other potential buyers, a person close to the negotiations said Wednesday.
Earlier this month, Seagram was singled out as the most likely suitor for British music company EMI Group Plc. -- home of the Spice Girls, Beatles and Bonnie Raitt. EMI, which was holding closed-door buyout discussions, did not release the name of the suitor and left the negotiating table with no deal. Those following the industry pointed to Canadian drinks and entertainment group Seagram Co. Ltd. and Walt Disney Co. as possible bidders
Analysts believe the move was sparked by news that PolyGram NV may be on the block after Philips Electronics NV said it was considering options for its 75 percent stake in PolyGram.
The analysts said the company that was talking to EMI may be more interested in PolyGram..
Analysts believe PolyGram is more attractive to would-be suitors than EMI, which has struggled with management squabbles.
The Dutch music and film titan is the world leader in music sales with close to 17 percent of the $40 billion global business. EMI comes in second with about 15.3 percent share of the market.
Despite its eagerness to beef up its portfolio of record labels, however, Seagram isn't likely to enter a bidding war, analysts say.
"My sense is that Seagram is not looking to do a deal at any cost," Graves said.
Seagram's stock (VO) was trading at 42-5/8 on the New York Stock Exchange Thursday afternoon following the news.
-- from staff and wire reports
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