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EMI Talks Off as Seagram Homes In on PolyGram

May 09, 1998|CHUCK PHILIPS and CLAUDIA ELLER | TIMES STAFF WRITERS

British music giant EMI Group ended talks Friday with Seagram Co. after failing to receive a purchase bid.

The move comes as negotiations between Seagram and Philips Electronics are said to be heating up over a possible acquisition of Philips' PolyGram worldwide entertainment empire. Officials at Seagram and PolyGram had no comment Friday, but sources said a deal is in the works and could be consummated within weeks.

Seagram Chairman Edgar Bronfman Jr., a sometime lyricist who co-wrote pop star Celine Dion's current hit single, "To Love You More," has acknowledged he'd like to expand his corporation's music holdings, but he has said he is unwilling to overpay for an asset.

Seagram's talks with EMI, which have been on again, off again over two years, apparently fell apart this week because Bronfman backed off from the estimated $9-billion price tag. Industry analysts believe PolyGram might be worth more than that since it is a more profitable company and would immediately transform Seagram's Universal Music Group into the No. 1 record company in the world.

PolyGram, which releases music by LL Cool J, Hanson, Boyz II Men and U2, could sell for as much as $10.5 billion, given its current market value and the premium a buyer would likely have to pay.

However, sources said Friday that Seagram may try to defray the cost of the acquisition by immediately selling off PolyGram's film assets. Analysts said the Dutch conglomerate's film division--which consists of a collection of boutique movie labels and the third-largest post-World War II catalog in the world--could fetch between $1 billion and $2 billion.

While Bronfman has been criticized in Hollywood for the poor performance of Universal's movie studio, he has been praised for revitalizing the company's once-dormant record division. A purchase of PolyGram would give Universal the strongest international distribution operation on the planet plus a roster of local music stars in Latin America, Southeast Asia and Europe.

If Bronfman pulls off the PolyGram purchase, it would not only redefine Seagram's stature in the music business, it would radically alter the architecture of the business itself. Such an acquisition would shrink the number of global competitors to just five music giants: Seagram, Sony, Bertelsmann, Time Warner and EMI.

The competition would get even slimmer if somebody else decided to step up to the table and buy EMI. Sources said Bronfman was interested in buying EMI, but refused to pay more than $7 billion--about $2 billion shy of the kind of bid EMI was said to be looking for.

Last week, EMI stock surged 20% following an announcement that the British conglomerate, which releases music by Garth Brooks, Smashing Pumpkins and the Spice Girls, had been approached about a possible offer for the company. On Friday, EMI's U.S.-traded shares were unchanged at $18.63 on Nasdaq following the firm's announcement that it had terminated negotiations with its unnamed suitor.

A statement issued from EMI's London headquarters said its board of directors informed "the third party that it is not willing to let the uncertainty continue." The company ndecided to make the public announcement, the statement said, to "put an end to the uncertainty and consequent speculation which the board regards as damaging to the interests of both shareholders and employees."

PolyGram shares inched up 19 cents to $49.69 Friday on the New York Stock Exchange.

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