Preliminary discussions were with "a French Group" that had been considering the purchase "for several years," company spokesman Ray Boyce said Thursday. Boyce didn't identify the potential buyer, saying that the only reason the company (VO) had issued its one-sentence statement was to satisfy French government regulations requiring notification to workers if a sale was anticipated.Boyce, who said the sale doesn't include the company's Mumm Cuvée Napa Valley operation, wouldn't comment on the motivation for the sale.
Seagram's announcement follows its pending purchase of Polygram in May for $10.4 billion and the $3.3 billion sale of its Tropicana unit to Pepsico in August. Seagram said it had hoped to peddle Polygram's film library for $1 billion, but has had no luck since MGM withdrew from discussions Monday after reportedly offering $400 million.
While securities analysts say CEO Edgar Bronfman Jr. has continually reassured them privately that he is committed to Seagram's spirits and wine roots, he has also made a point of emphasizing the relatively poor financial returns of this business sector.
"As an industry, the spirits and wine business has created no value since 1990," Bronfman told a trade gathering in New York on March 13. Spirits and wine, he said then, can't offer the financial returns expected by global financial markets.
Seagram shares, which gained 13/16 to 31 7/16 Friday morning, have taken it on the chin the past five months.
Overall wine and spirits revenues fell to $4.7 billion from $5.2 billion in 1997. Even before the Asian charge, spirits and wine cash flow declined 20 percent from $810 million to $650 million while entertainment cash flow soared 24 percent to $712 million. Spirits and wine case volumes dropped one percent.
Spokesman Boce emphasized that the bubbly sale discussions underway would allow Seagram to maintain worldwide distribution rights while allowing it "to realize the increased value" of the assets.
Seagram wouldn't provide sales or case production figures for the brands. However, Mumm and Perrier-Jouet are the Nos. 2 and 3 French champagnes, with a total of 190,000 cases sold in the U.S. in 1997, according to Adams Trade press, which tracks U.S. wine sales. Moet-Chandon is No. 1, with U.S. sales of more than 550,000.
Champagne and other sparkling wines have been a stagnant category in the U.S., with annual sales falling about 2 percent this year over 1997, according to Information Resources Inc.
The lackluster market and Seagram's even more lackluster returns from its spirits and wine units have kept divestiture speculation alive. The talk cranked up in late June, when Seagram filed its 8-K for the Polygram acquisition. Buried in the weighty document was the ambiguous statement, saying, "In the event that the spirits and wine business of the company becomes a separate publicly traded company, the applicable spin-off stockholders agreement shall not subject stockholder to the transfer restrictions set forth ..."
Boyce had no comment back then on the possibility that Seagram was considering a separate IPO for wine and spirits.
Written By Lewis Perdue