Martell Family Accepts New Seagram Bid

From Reuters

Members of the Martell family said they accepted a sweetened takeover bid for Cognac maker Martell et Cie made Monday by Montreal-based Seagram Co., apparently ending a transatlantic battle for control of the venerable 273-year-old firm.

In a statement, the Martells said they would sell their 41% stake in the firm to Seagram's Mumm et Cie subsidiary for $540 (2,975 francs) a share, an offer that values Martell at $818 million (4.5 billion francs) and is $86 a share more than Seagram's original offer last month.

With the 11.59% of Martell already bought by Mumm in the open market, it would give the Canadian conglomerate majority control with just over a 52% stake.

The sale is subject to clearance by Paris bourse authorities.

"We view this offer favorably and estimate that Seagram is the best partner for Martell and its different component parts," the Martell statement said.

The family said it hoped its support of the Seagram offer would stop recent "uncertainty about the future of the company."

'Pay the Moon'

Seagram and British beverage and hotel group Grand Metropolitan PLC have been struggling to gain control of Martel since December, when Seagram agreed to buy the Martell family's stake for $454 a share.

That transaction, however, was ruled illegal by the Paris stock exchange, and Grand Metropolitan entered the fray Jan. 6 with an offer of $514 a share.

While financial analysts who follow Seagram said its bid far exceeds Martell's value, they agreed that the investment makes sense in the long term.

Seagram has said its goal was to acquire a prestige Cognac producer to broaden its current line of products, which includes the Scotch brands Chivas Regal and Glenlivet, Sandeman port and the Champagne brands Mumm and Perrier-Jouet.

"They were prepared to pay the moon," said Toronto analyst Harold Wolkin of Nesbitt Thomson Deacon Inc. "It was like an auction for a painting. It's a prize."

The analysts added that Seagram can easily afford the takeover through its massive lines of credit and annual cash flow of about $275 million.

"We are delighted that the Martell family . . . continues to express its confidence in . . . the Seagram group," Seagram Chairman and Chief Executive Edgar M. Bronfman said in a statement as the new offer was announced.

"They paid the top price for a top-quality maker," Wolkin said.

Grand Met said it was studying the Seagram offer but would wait until the full regulatory position became clear before making any comment.

Seagram made the Martell offer after talks Monday with French Finance Minister Edouard Balladur.

Bronfman said Seagram would "honor and sustain Martell's special relationships with its employees, suppliers and the entire Cognac community. Martell, which has produced Cognac since 1715, will continue to operate as a free-standing company within Seagram."

Analysts in Paris said Seagram's original, notarized agreement last month to buy the family stake fell victim of its timing because of political sensitivity, just four months before France's presidential elections.

The mid-December agreement by Seagram with the Martell family was ruled by the Paris stock exchange to have violated takeover regulations.

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