HOLLYWOOD MEGA-DEAL : What Price Glory? : Seagram’s Tab for MCA May Be Overstated by $1.4 Billion

Seagram Co. continued on Friday to move quickly toward buying control of MCA Inc. amid growing confusion over whether the widely reported $7-billion price tag for 80% of the company was overstated by as much as $1.4 billion.

Sources close to the deal, expected to be announced as early as Sunday, said that the reported price leaked Thursday was too high, and that Seagram would actually be paying only about $5.6 billion, although the price was said to be still under discussion.

On Thursday, sources close to the situation had said that $7 billion was the price being paid for the 80% stake, which would put MCA’s total value at close to $9 billion.

The shifting price information followed a public skewering in Friday’s financial press of Seagram Chief Executive Edgar Bronfman Jr., who was widely characterized as a star-struck executive overpaying for his ticket into Hollywood.

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Seagram on Thursday sold 156 million shares of DuPont stock--which had been a highly lucrative investment--for $8.8 billion, which is expected to help the company pay for MCA. Seagram’s stock continued to tumble on Friday in reaction to the reports of the DuPont sale and the possible MCA purchase. Since Seagram closed at a 1995 peak of $32.25 on March 30, Seagram’s stock has lost $5.75 or 17.9% of its value, closing Friday at $26.50, down $1.375 for the day.

Evidently seeking to defuse Wall Street criticism of the sale of the DuPont stake, Bronfman on Friday told securities analysts in a conference call that Seagram had concluded that the potential of future gains from DuPont were less than what it could earn by “more active management of the money,” in the words of Rich Morrow, an analyst for BBN James Capel Securities in Toronto, who participated in the call.

Bronfman firmly turned away all questions relating to MCA, Morrow said.

Both Matsushita and Seagram for the first time on Friday confirmed publicly that they are in discussions about Seagram buying control of MCA. The two sides cautioned that final details, including price, were still being worked on, although sources said that they do not expect any major hurdles.

The two sides had previously stonewalled Wall Street, the financial press and regulators. Canadian stock regulators and Toronto Stock Exchange officials said they plan to investigate Seagram Co.’s disclosure practices. Seagram’s parent company is based in Montreal.

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MCA executives and others close to the deal privately were at a loss to explain the discrepancy between the original price floated publicly and the one being described on Friday. Some attributed it to an honest misunderstanding of the terms. Some cynics suggested that the financial press was manipulated so that the deal wouldn’t look so bad when it was formally announced.

Some sources speculated that one explanation might be that Seagram is taking on some MCA debt. If so, that would boost the value placed on the deal.

MCA’s holding company has $3 billion of debt, $2 billion of it taken on by Matsushita when it bought MCA in 1990. Sources said, however, that they did not think that Seagram would be taking on any debt.

Although Seagram’s sale of its DuPont stock had been in the works for some time, it is expected to provide Seagram with cash for use in buying control of MCA.

Analysts said they also expect Seagram to sell its nearly 15% stake in Time Warner, but suggested that the company can take its time and has several options, including selling it to a large company such as U.S. West that has links to Time Warner or selling it in chunks in the market. Analyst Jeffrey Logsdon of Seidler Cos. said that he expects Seagram to take from six to nine months to divest it.

Sources said that there have been no major discussions involving future management issues. The company is run by Chairman Lew Wasserman, 82, and President Sidney Sheinberg, 60. Both are angry for being kept in the dark on the sale talks.

Sources said Wasserman received a call Friday from Matsushita President Yoichi Morishita confirming the Seagram talks, the first word either he or Sheinberg had received from the company’s Japanese parent. “He read him the press release,” a clearly irritated Sheinberg said in an interview.

In his meeting with analysts, Bronfman said that because of a standstill agreement preventing Seagram from raising its DuPont stake beyond 25%, it had no ability to move for control of DuPont or gain greater influence.

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“It’s very apparent that the management of Seagram feels that from this day forward the potential gain in DuPont shares would be outweighed by the potential of MCA,” said David Leibowitz, an analyst for Burnham Securities in New York, who also heard the conference call. “It doesn’t have anything to do with what DuPont has done for them up to now.”

Seagram’s closing price of $26.50 on Friday placed the company’s entire market valuation at $9.8 billion--only 11% more than the $8.8 billion it will receive from DuPont.

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Also contributing to this report was Times staff writer David Holley in Japan.

* ENTERTAINMENT LEGEND

Deal may mark a sad ending to the Lew Wasserman era. A1

* WAIT AND WONDER

MCA employees ponder deal. D8

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

The MCA Empire

A Seagram purchase of a controlling interest in MCA would give it an entertainment giant with diverse holdings. Although its current owner, Matsushita Electric Industrial, does not break out MCA earnings, company insiders say MCA had about $400 million in profit in 1994. Here’s a brief look at the company’s portfolio:

MOVIES

For several years, Universal Pictures has been hugely dependent on one man: Steven Spielberg, whose Amblin Entertainment has produced “Jurassic Park” and other hits. Other than the Amblin films and a few others produced by Imagine Films, the studio is virtually hit-free. But Spielberg has threatened to exit the studio if his mentor, MCA Chief Executive Sidney Sheinberg, leaves. Analysts also wonder whether Universal can secure a long-term distribution contract with DreamWorks SKG, the Spielberg-Katzenberg-Geffen venture. There also are concerns about “Waterworld,” a Kevin Costner film that has gone way over budget.

* MCA acquired a 50% stake in Cineplex Odeon Corp., a Canadian movie theater chain, for $158 million in MCA stock in 1986. Seagram’s Bronfman family also participated in the deal; MCA and the Bronfmans remain the chain’s biggest shareholders, with a combined 68%.

* The company controls a library of 3,000 Universal films. Extracting more value from these assets, however, will require a deal with a broadcast or cable network.

HITS AND MISSES

MCA’s Universal Pictures boasts the No. 1 movie worldwide--”Jurassic Park”--and the No.1 domestic film--”E.T.: the Extraterrestrial.” Top-grossing movies from Universal:

Film / Box office (millions)

“Jurassic Park”: $900

“E.T.: the Extraterrestrial”: $700

“Jaws”: $460

“Back to the Future I”: $364

“Flintstone”: $341

“Back to the Future II”: $331

“Schindler’s List”: $321

Several Universal movies released in the past have had a tougher time at the box office, including:

“Little Rascals”: $50*

“Time Cop”: $45

“River Wild”: $48

“Major Payne”: $26**

“Billy Madison”: $31**

Note: All dollar figures are complied from box office receipts worldwide.

* Box office receipts reflect U.S. ticket sales only.

** Projected box office receipts.

MUSIC

The company’s Music Entertainment Group posted $2 billion in sales in 1994. In 1988, MCA acquired Motown Records for $61 million and in 1990 Geffen Records for MCA stock valued at $545 million. The company’s country music division is strong, but overall MCA had the lowest U.S. market share of the six leading music conglomerates. Company sources said the market value of the group, which encompasses the record labels and a concert division that includes the 6,000-seat Universal Ampitheatre, is $2.3 billion to $3 billion.

THEME PARKS

MCA owns the Universal Studio theme parks here and in Orlando, Fla. Much is riding on MCA’s announcement that it would double the size of the Universal City theme park over the next 25 years. The plan faces community opposition.

TELEVISION

The MCA Television Group produces series such as “Northern Exposure” and “Murder, She Wrote” but has not had a significant new hit in years. The company co-owns 50% of cable networks USA Network and the Sci-Fi Channel.

PUBLISHING & SOFTWARE

The company operates both the Putnam and Berkeley publishing houses. Largely through its association with Matsushita, MCA formed the Universal Interactive unit to distribute multimedia and video games for the 3DO system. The company owns a major stake in Irvine-based Interplay Prod

WALL STREET REACTION

Seagram’s stock price continued to head lower on Friday after dropping nearly a dollar a share on Thursday on news that the company would sell its stake in DuPont and buy 80% of MCA. Daily closes since January:

Friday: $26.50, down $1.375

Sources: TradeLine, Times reports, company reports. Researched by JENNIFER OLDHAM / Los Angeles Times