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Matsushita to Sell 80% of MCA to Seagram Co. : Business: Distiller to pay about $7.1 billion. Japanese owner and Hollywood giant clashed often over five years.

April 07, 1995|JAMES BATES | TIMES STAFF WRITER

Electronics giant Matsushita Electric Industrial has agreed to sell 80% of MCA Inc., headquartered in Universal City, to beverage giant Seagram Co. for about $7.1 billion, sources said, effectively ending an acrimonious five-year marriage in which the cultures of a Hollywood institution clashed repeatedly with those of its conservative Japanese owner.

The deal, which sources said would probably be formally announced as early as Sunday, follows a record $8.8-billion sale Thursday by Seagram of 156 million shares of chemicals and oil giant DuPont, a move that enables Seagram Chief Executive Edgar M. Bronfman Jr. to finance the MCA deal and fulfill his long-held ambition of becoming a major player in the entertainment industry.

Bronfman, who is based in New York, is the grandson of the founder of the Montreal-based distiller, which his family controls. He has long been enamored with the entertainment business, producing the 1981 film "The Border" with Jack Nicholson and dabbling as a songwriter, writing such tunes as "Whispers in the Dark."

Bronfman still faces the major question of deciding who will manage MCA, which is the parent of Universal Pictures and other entertainment businesses. The company's top executives, Chairman Lew R. Wasserman and President Sidney J. Sheinberg, are expected to leave, although sources suggested that they could be asked to stay in charge during a transition. Both are angry that they were kept in the dark during the talks.

Many San Fernando Valley neighbors of MCA Inc. had their spirits lifted Thursday by news that control of the entertainment conglomerate will change.

At homeowner association and regional planning meetings, the neighbors have expressed intense frustration in recent weeks about MCA's announcement of plans to double development of its 415-acre Universal City property over the next 25 years, creating a family-oriented destination resort.

Now they look forward to having the chance to persuade the company's new owner that the expansion is unwelcome. "We hope that they (Seagram) will not want to put a theme park right smack in the middle of a residential neighborhood," said Polly Ward of the Studio City Residents Assn. "We hope they will see it as the wrong project in the wrong place."

One analyst suggested that the $3-billion expansion plan might even have been a red herring intended to trigger Matsushita's ire and encourage the sale of MCA.

"It's exactly the kind of thing that would irritate Matsushita," said Joseph Osha, an analyst who covers the mammoth consumer electronics company for Smith Newcourt Securities in Tokyo. "Its managers are tired of the heads of MCA coming to them with demands for aggressive and speculative expansion plans.

"Matsushita considers that wheeling and dealing, and they are not wheelers and dealers."

Matsushita's sale of a majority of the company marks a watershed event in the about-face that Japanese companies have made since buying U.S. assets in a wild shopping spree in the late 1980s and early 1990s. Purchases ranged from Hollywood studios such as MCA and Columbia Pictures to such crown jewels as Rockefeller Center in New York and the Pebble Beach golf course in Northern California.

Matsushita's acquisition of MCA in particular, coming on the heels of Sony's purchase of Columbia for $3.4 billion in 1989, triggered widespread fears that America's entertainment business would soon be in the hands of wealthy foreign industrial concerns.

Instead, Hollywood has proved full of land mines, with Sony Corp. taking a $2.7-billion write-off last fall on its Hollywood investment and Matsushita clashing repeatedly with MCA's American managers. Hollywood executives speculated that Sony might follow Matsushita's example. Sources at Sony denied that the company plans to do so.

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Matsushita, which would not comment on the deal, is known for making televisions, videocassette recorders and other products sold under brand names such as Panasonic, Quasar and Technics. The Osaka company's original idea in buying MCA was to ensure that new video and music formats, such as the digital videodisc, would be well supported by new films. By keeping a 20% share of the company, Matsushita is expected to achieve that goal.

But MCA managers and other Hollywood executives believe that Matsushita bought MCA largely in reaction to the purchase of Columbia by archrival Sony. Hollywood executives say the company did not understand what it was getting into, and never appreciated the quirky economics and culture of the entertainment industry.

To some extent, Matsushita's experience in the entertainment industry is no different than that of non-Japanese investors that have been burned in Hollywood, as Coca-Cola was with Columbia and Transamerica with United Artists.

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