Seagram Set To Buy Polygram

May 11, 1998 / 6:00 PM EDT / AP

Seagram Co., seeking a strong music business to keep up with its huge rivals, is reportedly close to acquiring PolyGram, the world's biggest record company, for $9 billion to $10 billion.

Shares in London-based PolyGram rose 6 percent after Monday's report in The Wall Street Journal, which the companies would not confirm.

The Journal said Seagram turned to PolyGram after talks with Britain's EMI Group PLC unraveled last week. Seagram, the owner of Universal Studios, is apparently trying to bolster its relatively small music business to catch up to competing entertainment conglomerates such as Time Warner Inc. and Sony Corp.

PolyGram owns the Motown, Island and Mercury record labels, among many others, and has a vast roster of artists including U2, Elton John, Hanson and Boyz II Men.

The company also owns a film division that is unprofitable but has a library that could entice Seagram's television partner, Barry Diller, the Journal said.

Seagram's roster of musicians includes Beck, Reba McEntire, Bush and B.B. King. Its labels include Universal and Interscope.

Sources familiar with the discussions told the Journal that Seagram chief executive Edgar Bronfman Jr. has been negotiating with top management of Philips Electronics NV, the Dutch electronics giant that owns 75 percent of PolyGram.

Philips said last week it would explore various options for its stake in PolyGram.

A Philips spokesman in Amsterdam, Netherlands, would not comment on the report and said the company has no deadline for making a decision about its PolyGram stake. A Seagram spokesman in New York dismissed the report as speculation and also refused comment.

A PolyGram spokeswoman in New York referred questions to Philips, but said PolyGram would welcome any action that would benefit its shareholders, management and artists.

Montreal-based Seagram, which built its fortunes in the spirits business, entered the entertainment industry in 1995 with a $5.7 billion purchase of MCA Inc., which was renamed Universal Studios. Entertainment now accounts for about half of the company's revenue.

USA Networks Inc., run by Diller, could be a buyer for PolyGram's film business, whose library includes The Graduate and When Harry Met Sally, the Journal said. Seagram sold control of USA Networks to Diller last year.

The Seagram-PolyGram report comes after Seagram reportedly had been engaged in lengthy negotiations with EMI, owner of the Capitol and Virgin record labels. EMI, whose artists have included the Beatles, Spice Girls and the Rolling Stones, said late Friday it ended talks with an unnamed suitor, widely believed to be Seagram.

EMI shares fell 7 percent in London on Monday.

PolyGram's profits rose 17 percent last year to about $390 million and sales also jumped 17 percent to about $5.5 billion. Strong record sales offset losses in the company's film ivision.